Industry sources say that the Chinese government is in talks with the textile and cotton industry players to get rid of rising cotton inventories in the domestic market to lower process and reduce imports.

Beijing is said to be sitting on around 11 million tons of cotton stocks, about half of the global total, after a three-year stockpiling programme aimed at supporting farmers. However, after it announced roll-back of its cotton stockpiling policy, the government is under pressure to get rid of the ageing stockpile, which loses its value over time. The government, last year sold less than 64,000 tons, through an auction, much less than a target of 1 million tons since the government-set prices could not attract bids.

International market is watching China’s moves and if decides to sell held-up stocks then it will further impact demand for cotton imports by the country, which happens to be the world's top textile manufacturer.