On January 14, the U.S. Customs and Border Protection stated that the United States would ban the import of all cotton and tomato products from China’s Xinjiang region. The ban applies to cotton yarn, clothing and textiles made from cotton grown in Xinjiang. The ban, known as a “release moratorium,” also applies to products processed or manufactured in third countries. After the ban was announced, domestic cotton prices were suppressed. The main contract of Zheng Cotton 2105 fell by 2.51% on the day, and the closing price fell below the 15,000 yuan/ton round mark.
Xinjiang cotton accounts for a huge proportion, and textile raw materials are difficult to avoid
It is understood that this is not The United States issued a ban on Chinese cotton for the first time. On December 2, 2020, the U.S. Department of Homeland Security’s Customs and Border Protection announced a withholding order on cotton and cotton products produced by the Xinjiang Production and Construction Corps and its affiliated entities, banning related products from entering the United States on the grounds that the Corps “exists forced labor.” “. Compared with the previous ban, this time the ban was expanded from Xinjiang cotton to Xinjiang cotton, and the scope of the attack was expanded. Survey data from the China Cotton Information Network show that Xinjiang’s total cotton output in 2020/2021 was 5.35 million tons, a year-on-year increase of 180,000 tons, or 3.5%, and the national total output was 5.892 million tons, a year-on-year increase of 2.6%. Xinjiang cotton accounted for 90.80% of my country’s cotton production that year, and this proportion has been on the rise in recent years. For most domestic cotton spinning companies, Xinjiang cotton is an indispensable raw material, with only a few companies being exceptions: one is a small textile factory in the interior that mainly uses local cotton as raw material; the other is a company that purely uses Indian Enterprises that use cotton, American cotton, Australian cotton, etc. as raw materials, or purely use imported yarn. To some extent, this ban is almost equivalent to the United States rejecting Chinese cotton textile products.
Double restrictions on technical strength make it almost impossible to implement the ban
It seems to be an extremely significant negative. But upon closer inspection, the likelihood of this ban being implemented is extremely slim. The first is the technical difficulty. After inquiry and investigation, the country of origin of cotton is relatively difficult to judge. There are certain differences in length, impurity content, consistency and other indicators of cotton from different countries. However, after making cotton textile products, such as ready-made clothes, you want to determine the source of some of the fibers. It’s extremely difficult. After asking some institutions, it is currently not possible to do this, and even if such technology is available, the cost is expected to be extremely high. Regardless of whether the United States has such technical conditions and whether the technology is universally applicable in customs, it is incredible to consider that under the current epidemic background, customs offices in various countries are strictly checking whether imported items carry the new coronavirus. The United States does not prioritize the chaotic epidemic and political turmoil in its country, and does not use funds to relieve people and businesses in urgent need of support. Instead, it spends a lot of money to focus on testing whether imported cotton products contain Xinjiang cotton. It sounds like a Dry humor. Moreover, the current imported goods from China have the advantages of high quality, low price, high safety, and low risk of default. Therefore, we feel that the United States does not have the confidence to completely reject Chinese cotton textile products.
On paper, what does the United States want?
In the absence of practical significance, the US ban statement may serve the following purposes:
Art. 1. Further sanctions on institutions and companies in Xinjiang, my country, to disrupt China’s internal affairs. Previous measures include but are not limited to including the Xinjiang Production and Construction Corps on the SDN list, banning the import of cotton, clothing and other products from six Chinese companies or institutions, etc.
Second, reduce the proportion of Chinese textiles and apparel in U.S. imports. This operation is not the first time in history: in the 1950s and 1960s, the proportion of Japanese cotton textiles in the U.S. import market increased from 17.4% in 1951 to more than 60% in 1956. Low-cost imported products crushed the U.S. textile industry. , the half-century-long Japan-US textile war began, and was eventually alleviated by the Japanese government and the textile industry implementing the “Voluntary Export Restrictions (VER)” and the “Japan-US Cotton Products Agreement.” In 2015, the total value of textiles and clothing imported by the United States was US$8.146 billion, of which US$3 billion was imported from China, accounting for 36.82% of the total US imports. The U.S. Department of Commerce intends to control the proportion of imports from China. In 2019, this proportion was reduced to 33.41%. From January to November 2020, the United States imported a total of US$82.285 billion in textiles and clothing, a year-on-year decrease of 20.32%. Among them, imports from China were US$23.175 billion, a decrease of 32.35%; imports from Vietnam were US$12.463 billion, a decrease of 6.64%; imports from India were US$6.194 billion, a decrease of 17.26%. Some orders from China were transferred to India and Vietnam. Such restrictions and transfers have continued to occur in recent years, and the transfer may accelerate after the comprehensive ban on Xinjiang cotton is implemented.
Third, use external conflicts to shift the focus of domestic conflicts and make it more difficult for Biden to come to power. Transferring domestic conflicts into international conflicts and reducing the pressure on the domestic ruling party has been a common practice of many countries in history. The Trump administration’s proposed sanctions on Xinjiang cotton at this time can also transfer the subsequent counterattack pressure from the Chinese government to the new Biden administration that takes office after January 20, which can be said to kill two birds with one stone. However, this may also become a bargaining chip for the Biden administration to ease Sino-US relations.
So, how much cotton consumption may be reduced by this ban on Xinjiang cotton? A rough calculation provides a reference: China’s domestic cotton consumption and foreign trade each account for 50%. Assuming that the proportion of foreign trade increases to 55% during the epidemic, the proportion of textiles and clothing exported to the United States accounted for 16.98% of China’s exports in 2019, and further decreased during the epidemic. ���Assume that the United States expects China’s share to be reduced from 30% to 20% (the average annual share in the past was less than 1%), that is, to reduce imports by 1/3. When China’s annual consumption is 8 million to 9 million tons, such an adjustment will reduce cotton consumption by approximately 220,000 to 247,500 tons, and is unlikely to be completed within one year.
If China continues to buy American cotton to push up ICE cotton prices, and domestic cotton stabilizes or even falls around 15,000 yuan/ton, the price difference between domestic and foreign cotton is expected to shrink to less than 800 yuan/ton. within, thus opening the purchase and storage window. In addition, according to the announcement of the State Grain and Material Reserves Administration, the purchase and storage target for this year is around 500,000 tons. </p
