'They might bring inflation down this year, but world prices are rising so they are also importing inflation.' China is set to become the world's biggest importer of cotton, corn, wheat and industrial commodities this year, including paper.

China's demand is forcing up international prices for some of these commodities, which already have undergone steep rises.

Its rulers are tied by the country's dependence on global commodity exchanges. This is best illustrated by cotton for which China is the world's biggest consumer, third biggest producer, and since last year its biggest importer.

In the marketing year to August, it probably would have imported 3.2 million bales (or about 500,000 tonnes). Industry sources predicted that in the next marketing year, imports would be of the same order.

In line with Beijing's claims that it has brought inflation below 20 per cent, cotton yarn prices were supposed to be falling and stocks rising.

This has been disputed by industry sources. One said: 'They are saying this for domestic reasons and to lull the international markets.

'If people think that China will buy big, prices will rise, making their imports more costly.' Last week, China said textile selling prices had fallen 10 per cent and stocks of cotton yarn were ballooning. Xinhua (the New China News Agency) reported that from January to April China produced 8.9 million bales of yarn, 11 per cent more than demand.

Although prices for low quality cotton and yarn may indeed have been falling, the Chinese Government has been forced to respond to anticipated shortages by a hefty rise in cotton purchasing prices.

The state is now paying cotton growers 28 per cent more for their cotton than last year, a rise that will feed into the retail price index.

Officially all sales are controlled by the state after China aborted an experiment in which some provinces opted out of the planned economy.

But the black market still flourishes.

State-run mills and township enterprises are fighting for supplies of cotton. To curb demand, China said it intended to cut the number of spindles from 41 million to 27 million this year. It also is hoping it can reverse a decline in cotton production.

China aimed to grow 4.5 million tonnes compared to 4.25 million tonnes in 1994, but it has failed to meet planned targets over the past two years.

Trade sources doubted this year's crop would be good, pointing out that a mild winter had encouraged the spread of the pink bollworm.

An analyst said: 'This had a devastating effect on Chinese cotton growers since 1991, and it is getting worse. There is a fourth generation of worm which is resistant to pesticides.' Even China's biggest producer, Shandong province, is now a net importer of cotton.

Although China's agricultural supremo, Politburo member Jiang Chunyun, has been touring the country urging officials and peasants to increase yields, Western experts believe there has been only a marginal increase. In the past, the Chinese Communist Party had control over a planned economy, and theoretically could raise production or lower demand simply by issuing edicts. Reforms and China's increasing interdependency with the rest of the world has destroyed this power.

Prices of cotton and clothing in China are certain to rise because worldwide cotton stocks have run down over the past two years, partly as a result of poor harvests in other countries such as Pakistan.

Some of Beijing's problems were of its own making. It discouraged cotton production after 1991 by giving peasants IOUs for their cotton which proved hard to redeem. Then local officials encouraged the proliferation of yarn mills, while the Agriculture Ministry took inadequate steps to stop the bollworm pest.