The new cotton year has already begun. How will the trends in the operation of cotton and cotton textiles develop in the new year? How will the national cotton control policies play a role in the new year? And how should enterprises operate under comprehensive conditions? These are important issues facing all units involved in the cotton industry, including silk printed fabrics.
For relevant government departments, ensuring the stable operation of the new cotton year and preventing large fluctuations that could impact the industry should be the main focus of regulation. There are many issues to consider here, such as preventing sharp fluctuations in cotton prices, avoiding significant changes in next year's cotton planting area, and preventing instability in domestic and export textile products. All these are important objectives for regulation.
For enterprises, under the backdrop of macroeconomic government regulation, how can they take proactive actions in the cotton sector to achieve better returns? This involves concerns about procurement of target raw materials, coordination at the product end, reasonable deployment of liquidity structures, and prevention of financial risks. These should be the main focuses for companies involved in the cotton industry.
In the new cotton year, under the interactions of various entities, the cotton market may either become extremely active or remain calm, but it will certainly not lack underlying currents.
Firstly, overall, combining the currently released relevant policies (such as those from Quanzhou clothing showcased at the Hong Kong Fashion Festival), the domestic cotton market in the new cotton year will be policy-driven.
Since China's cotton reform, the shadow of policy dominance remains evident, especially more pronounced during special times. The intense fluctuations in cotton prices last year seemed like a performance, but from another perspective, it also reflected the inability of timely policy regulation. Large fluctuations in cotton prices are highly detrimental to the healthy development of the industry, which places higher demands on relevant departments' actions. Relevant government departments, core industry organizations, and enterprises should reflect appropriately—not only by establishing more contingency plans but also by making policies more transparent and predictable. Industry and enterprise contingency plans should have foresight.
Secondly, in the new cotton year, the restoration of global cotton supply and demand structures and adjustments in order will form synergies affecting China’s operations.
The significant increase in global cotton supply and the comparative advantages of India, Pakistan, and other textile processors will make the operating environment for China's textile industry even more complex. The industrial chain advantage of China's textile industry will face serious challenges.
The buyer position in the cotton market will determine that import cotton prices will remain lower than domestic prices for a long time. There are two aspects to this: First, the global average cost of cotton cultivation and subsidy policies of major producing countries make global cotton prices extremely unfavorable for China's cotton production, making it impossible for domestic cotton prices to rise significantly. This year's standard-grade cotton reserve price of 19,800 yuan per ton has already significantly increased global cotton planting areas. Second, China accounts for a large share of global textile production and is also the largest cotton producer and importer. Under conditions where there is little difference between domestic and international material prices, China's industrial chain advantage in textile processing is prominent. However, if the price differences are too large, combined with current import and export policies, it could lead textile enterprises into difficulties. At the same time, neighboring countries with raw material comparative advantages may seize the domestic yarn and fabric markets. In other words, comparative advantages will lead to China importing large amounts of yarn and fabric, and RMB appreciation will also play a promoting role. The pressure on the front-end of China's textile industry will increase.
Thirdly, sudden factors in the global environment cannot be ignored regarding their impact domestically.
Although the external dependence of textiles is gradually decreasing, the current proportion is still significant. At critical moments, it might act as a lever, accelerating fluctuations. The financial tsunami triggered by the U.S. "subprime crisis" in 2008 ultimately had profound effects on the real economy. China's financial stimulus policies also left many hidden dangers for domestic development.
The global situation remains fragile. The recent turmoil caused by the downgrade of sovereign debt credit ratings in the U.S. and Europe indicates that the international situation is very vulnerable, and the balance of international order is being re-established. The textile industry and textile products are sensitive to these changes. Domestically speaking, sudden events causing fluctuations in trade prices of bulk commodities, and prolonged repairs leading to reduced demand, will affect the prices of industrial products; instability in exports caused by sudden events is extremely disadvantageous for business operations.