China will subsidise its cotton-growing farmers. The aim is to prevent a fall in cotton production and to curb demand for imports. The country has abandoned its stock piling program that had reduced supply to the market and bolstered global prices. An end to buying and the switch to subsidies has seen US prices drop over market fears of weaker demand from China amid plentiful global supplies.
Cotton growing in China has already declined significantly in provinces outside Xinjiang in recent years as farmers seek higher wages in cities or turn to less labor-intensive crops such as wheat. China’s total cotton acreage declined nearly 7 per cent in 2013 from the year before. The country’s cotton imports in 2014-15 are expected to fall to a 10-year low of 1.3 million tons, less than half the previous year’s total.
China views the financial support of its 700 million farmers as crucial for both its food supply and political stability, particularly in regions with large ethnic minorities such as Xinjiang. The country still holds nearly 12 million tons of fiber in state reserves. That is around 60 per cent of global stocks.
Beijing is determined to keep cotton output in Xinjiang at stable levels as it seeks to turn the province into a major textile hub, attracting more garment makers to boost local employment.
