US ban on Xinjiang cotton may push China to open up to more imports to meet demand

Washington banned entry of all products using cotton from Xinjiang early this year over China’s alleged ill-treatment of its ethnic Uygur Muslim minority
Beijing may issue another batch of import quotas soon to meet rising global demand for textiles after awarding 700,000 tonnes last month, an analyst said

Xinjiang cotton

Bloomberg

Published: 6:30pm, 27 Jun, 2021

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China looks likely to allow more cotton imports than usual this year after a US ban on fibre from Xinjiang spurred some Western retailers to avoid material produced from the controversial region.

Beijing may issue another batch of import quotas soon to meet rising global demand for textiles after awarding 700,000 tonnes last month, said Xu Yaguang, an analyst at Huatai Futures, after China issued just 400,000 tonnes of quotas in 2020.

Washington banned entry of all products using cotton from Xinjiang early this year over China’s alleged ill-treatment of its ethnic Uygur Muslim minority.

Hennes & Mauritz – better known as retail brand H&M – also refused to use cotton from the region, which accounts for around 80 per cent of Chinese output and a fifth of the world’s supply of the fibre.

01:08

Xinjiang, China’s top cotton producer

The Biden administration is increasing pressure on China over Xinjiang, where advocacy groups and a panel of United Nations experts say Uygurs have been subjected to mass arbitrary detention and forced to work against their will.

The potential opening up to more cotton imports comes as the global recovery gains traction, boosting demand for apparel. International supply has also been hit by cooler-than-normal weather in Xinjiang and droughts in other top growers Brazil and India. Cotton futures have risen by 44 per cent over the past year.

China’s cotton imports have already increased following the US ban, customs data shows. Inward shipments have averaged around 275,000 tonnes a month in 2021, compared with 179,000 tonnes last year and 154,000 tonnes in 2019.

02:38

Global brands face backlash in China for rejecting Xinjiang cotton

Huatai Futures’ Xu said the next batch of import quotas would likely be smaller than the 700,000 tonnes last month.

China also issues 890,000 tonnes of low-tariff cotton-buying quotas on an annual basis, so the extra amounts come on top of that. The country awarded 800,000 tonnes of additional quotas in 2019 before the coronavirus savaged the global economy.

The government could issue even more quotas later in the year if more textile export orders are diverted to China from India, said Mao Chengsheng, an analyst at Chaos Ternary Futures.

As well as the additional quotas, Beijing may soon hold its annual sale of cotton from state reserves, said Wang Qianjin, a senior analyst at Shanghai International Cotton Exchange. The government sold 500,000 tonnes of cotton in the first such offer in July last year.