China's textile manufacturing sector will continue to expand beyond the 50 million bales or more it now consumes annually but not at the same rate as in the past five years, the secretary general of the China Cotton Association says.
Madame Gao Fang, whose organization represents about 60 percent of China's cotton industry, said China's textile production probably will not continue to grow at 40 percent per year, a rate which has vaulted it into the position of being the largest cotton consumer in the world at more than 50 million bales.
“In the last five years, China has seen very fast growth of the textile industry,” Madame Gao said through an interpreter. “That growth will not be as fast as before because of machinery availability, the cost of labor and the cost of borrowing.”
Madame Gao was responding to reporters' questions following the signing of a memorandum of understanding between the National Cotton Council and the China Cotton Association at the Memphis Cotton Museum on Nov. 13.
The memorandum signals a “spirit of cooperation and good will,” said Allen Helms, National Cotton Council chairman and a cotton producer from Clarkedale, Ark., who signed the agreement on behalf of NCC.
While that is the goal of the agreement, Madame Gao indicated in her comments to editors and farm broadcasters that Chinese cotton buyers could continue to be the same tough negotiators they've been since China first began importing U.S. cotton more than two decades ago.
Asked about China's previous issues with U.S. fiber quality, she said she had talked with members of the China Commodity Inspection Bureau and that the quality of the current crop is “even lower” than it has been in previous years.
She said Chinese textile mill officials continue to report problems with packaging and short fiber content, two areas that have drawn chronic complaints from Chinese mill representatives for a number of years.
“But officials at Weigiao, the largest textile mill in China, told me the quality of the U.S. cotton it receives is improving,” she said.
When an editor asked if she would predict how much imports from the United States might increase over current totals, she noted that U.S. market share has actually been decreasing although the import total has been increasing.
While U.S. market share was at 60 percent of total imports three years ago, it now is running around 40 percent, she said. She also cited Uzbekistan and India as strong competitors for U.S. market share in China.
Nonetheless, she said she has “great confidence” that the cotton associations of the two countries will be taking their business relationship to a new level because of the memorandum of understanding.
“Chinese cotton leaders are prepared to move a step higher in the development of our relationship,” she said. “We believe that the signing of this agreement means we are turning a new page of cooperation.”
National Cotton Council officials also have high hopes for the memorandum of understanding.
“Cotton trade with China is very healthy today as the United States exported 8.6 million bales — about 36 percent of its crop — to China in the past 12 months,” said Helms. “This memorandum of understanding is significant for the U.S. cotton industry as it seeks to build not only on that current momentum but on its long-time relationship with China.”
Madame Gao said purchases from the United States have slowed somewhat because increased production in China has led to bigger supplies and lower prices.
Chinese cotton farmers are believed to have increased last spring's plantings by about 10 percent over the previous year because of the expectation of higher prices following the production of a smaller crop in 2005.
Helms said the U.S. cotton industry has made substantial strides in fortifying its infrastructure to accommodate the current extraordinary volume of U.S. raw cotton export trade. Five years ago, U.S. growers sold 70 percent of their crop to domestic textile mills. Now it exports nearly 70 percent.
“The industry also has renewed its commitment to protect and enhance U.S. cotton's reputation for producing high quality cotton, delivering it in a timely manner and honoring contracts,” he said. “We must follow through on that commitment to remain competitive in the Chinese and other global markets.”
Also representing the U.S. cotton industry at the memorandum of understanding signing was Cotton Council International Chairman Gary Taylor, a Memphis merchant. They were joined by staffers from NCC and from NCC's export promotion arm, CCI. Madame Li Lin, CCA's director of public affairs, accompanied Madame Fang on her trip.
Helms, who recently returned from leading an NCC delegation to China, said Cotton Council International will continue to play a key role in expanding export demand for U.S. cotton in the coming year, including even greater activity in China than in 2006. Among CCI's major endeavors in China this past year were:
- Established a CCI office in Shanghai;
- Launched, with help from U.S. exporters, the China Cotton Schools, which helped representatives from 145 Chinese cotton importing companies get a better grasp of the international cotton market's complexities;
- Teamed with Cotton Incorporated to conduct “Cotton — Beyond Your Imagination,” a major promotion initiative targeting consumers in China's major urban areas; and
- Hosted, along with Cotton Incorporated, the 10th annual Cotton Days, which highlighted the inherent value of cotton through COTTON USA consumer events in China and other key Asian markets.
“While we were there, the NCC and CCA agreed to have further industry leadership exchanges and dialogue on future issues,” Helms said.
He said one of those issues is the global threat from synthetic fibers.
“Man-made fibers still represent the greatest challenge to cotton's profitability worldwide,” Helms said, “and enhanced basic consumer preference for cotton products in developing economies, such as China, represents the largest opportunity for demand growth.”