The No. 1 Central Document is issued to set the tone for future cotton target price reform
With the “Several Opinions of the Central Committee of the Communist Party of China and the State Council on Deepening the Structural Reform of the Agricultural Supply Side and Accelerating the Cultivating of New Motive Force for Agricultural and Rural Development”(Center No. 1 Document), the industry has expressed great concern about the statement of cotton issues in the document. After the expiration of the three-year trial period of Xinjiang’s cotton target price reform, the future policy direction has become the focus of attention.
On February 6, at the new hearing press conference held by the New Listening Office of the State Council, Han Jun, deputy director of the Office of the Central Rural Work Leading Group, interpreted the document’s content on the price formation mechanism of agricultural products.
Han Jun said that the reform of the price formation mechanism and purchase and storage system of key agricultural products is the highlight of promoting the structural reform of the agricultural supply side. Regarding the cancellation of the temporary cotton purchase and storage policy and the implementation of a pilot cotton target price reform in Xinjiang, he commented that “important progress has been made.”
Regarding the future direction of reform, he said, “We must adhere to the market orientation and protect the interests of farmers. In terms of the pace of implementation, we must adhere to the implementation of policies based on varieties and gradual advancement.”
The No. 1 document clearly states: “Deepen the reform of the price formation mechanism and purchase and storage system of important agricultural products such as grain and food.” Regarding the content of the reform, the document emphasizes “adjustment and improvement of the Xinjiang cotton target price policy, improvement of subsidies Method.” According to estimates by industry insiders, Xinjiang’s cotton target price reform will continue to be implemented. As for how to “adjust and improve”, relevant departments are now studying the formulation of further policy plans.
According to reports from all parties in the cotton industry chain, the pilot policy has achieved good results in the three years since its implementation. It is mainly reflected in the basic establishment of the market price mechanism, the market awareness of market entities has been significantly enhanced, the interests of farmers have been protected to a certain extent, the efficiency of financial subsidies has been improved, and the price difference between domestic and foreign cotton is gradually narrowing.
Zhu Beina, president of the China Cotton Textile and Weaving Industry Association, also said: “Judging from the evaluation results of Xinjiang’s cotton direct subsidy work, the cotton price reform pilot has achieved remarkable results, and cotton prices are basically determined by market supply and demand.”
Industry experts said that the three-year price subsidy pilot also has some problems that cannot be ignored. From a national level, the subsidy amount exceeds my country’s WTO commitments. According to WTO rules, the target price subsidies implemented in our country are “yellow box subsidies”, and the amount of the subsidy is subject to the de minimis upper limit. Judging from the three-year pilot situation, the subsidy amount of the cotton target price subsidy pilot policy is constrained by the subsidy upper limit. If no adjustments are made in the future, it is likely to raise questions from other member countries and lead to trade disputes.
Judging from the subsidy price, the standard for setting the target price is unclear and changes too frequently. The setting of the cotton target price in the past three years has not been determined completely in accordance with the “production cost + basic income” of the policy design. There are often factors of competition among different departments and different stakeholders. Due to the different interest demands of different entities and departments, inconsistent policy views, and different understandings of industrial progress, the differences in opinions among all parties are increasing, making it increasingly difficult to set target prices. This also leads to market uncertainty.
Due to unstable policy expectations, all parties in the cotton market have no idea of their future expectations.
For fabric companies, the most important concern is cotton quality. Judging from the results of the three-year pilot program, as subsidies are basically based on the actual sales volume of growers, the overall quality of cotton has shown a downward trend. “Foreign goods enter the market and domestic goods enter the warehouse.” There is a shortage of high-grade cotton and a surplus of low-grade cotton. This is the current situation. The current situation of my country’s cotton industry. The decline in raw material quality has directly affected the international competitiveness of my country’s fabric industry. Fabric companies believe that the current supply of cotton resources has improved significantly compared with the previous two years, but there is still a gap between the company’s expectations and companies are very concerned about “where to buy good cotton.”
In the final analysis, the cotton target price reform is a supply-side structural reform. In March last year, General Secretary Xi Jinping clearly pointed out that under the new situation, the main contradiction in agriculture has changed from insufficient total quantity to structural contradiction, mainly manifested in the coexistence of periodic oversupply and undersupply. Promote agriculture�Structure reform on the supply side and improving the comprehensive benefits and competitiveness of agriculture are the main directions for the reform and improvement of my country’s agricultural policies at present and in the future.
General Secretary Xi’s speech is the reason why the central government has made promoting the structural reform of the agricultural supply side the theme of the No. 1 document of the central government in 2017.
Tang Renjian, deputy leader of the Central Rural Work Leading Group and Office Director, said when interpreting the No. 1 document that the main direction of promoting the structural reform of the agricultural supply side is to improve the quality of agricultural supply. We must be market-oriented, optimize the supply structure, and keep up with the pace of upgrading consumer demand. We must adhere to quality-based agriculture development, accelerate agricultural science and technology progress, and improve agricultural comprehensive benefits and competitiveness. The fundamental way is to deepen reforms. It is necessary to activate the potential of resource factors through institutional reform and mechanism innovation and cultivate new momentum for agricultural and rural development.
According to the reporter’s understanding, the China Cotton Textile and Weaving Industry Association took the lead in convening a meeting last year to evaluate the effects of the Xinjiang cotton price reform pilot. Experts in the agriculture, business, and circulation fields at the meeting reviewed the Xinjiang cotton target reform Issues since the policy pilot have been communicated internally.
All parties are generally satisfied with the results of the pilot and hope that the reform policy will continue to be implemented. At the same time, it is recommended to abandon the “yellow box subsidy” policy that is linked to output and adopt a “blue box policy” that is not linked to current output. .
Regarding cotton quality issues, experts recommend high-quality and superior supplements, but an official from the National Development and Reform Commission said that quality issues still need to be resolved through marketization. Zhu Beina, president of the China Cotton Textile and Weaving Industry Association, also said at a meeting that “the Xinjiang reform pilot policy needs to be further improved, including high quality and low prices, establishing a long-term mechanism to stabilize the market, improving the real subsidy effect, and taking into account domestic and foreign markets.”
The price reform of agricultural products, including cotton, which is of great concern, is gradually entering the deep water zone. There is no turning back. The announcement of the No. 1 document points out the direction for the future reform of the cotton price system.
“The reform policy will definitely continue, but how it will be changed is still unknown. The decision-making power of policy introduction lies with the government, which should ultimately be the result of the game between various stakeholders.” An insider said.
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