China Announces Cuts to Cotton Import Quotas

By Jim Steadman|September 22, 2014

As part of the country’s new cotton policy, China has announced that it will cut its tax-free import quotas for 2015 to the minimum amount of 894,000 tons required under its commitments to the World Trade Organization.

Under the previous policy, China had also offered another quota in addition to the WTO-compliant amount, but it will not be available next year.

According to multiple news sources – including Reuters and Financial Times – all details of the new policy are not yet clear. At this time, it appears that Chinese mills will still be able to import cotton outside of the stated quota if international prices are low enough to help offset a 40 percent import tariff for non-quota purchases.

But, the quota restrictions alone may impact overall demand for foreign cotton and add more pressure on global cotton prices, which have already dropped 27 percent this year.

The new policy announcements come as part of the government’s anticipated plan to reduce the country’s stockpiles of cotton and continue to support domestic production. In the past week, the government stated that a new subsidy program for cotton growers would be put in place for Xinjiang, the country’s top growing region. This recent announcement hints that subsidy programs may also be offered to growers in the Yellow River and Yangtze River valley areas.