Cotton production in China, and the Creation of a New Manufacturing Base

Since 2005, China has emerged as the world’s major producer of garment and textiles. In 2005, the quotas governing global trade in textiles and garment were removed. After this, China’s imports of cotton practically tripled. China is the world’s largest producer of cotton. It is also the largest importer and consumer of cotton. Cotton is a renewable and decomposable resource, and is the major fibre used by the textile industry. In the period between 1986 to 2005, the total volume and consumption of cotton production increased.
Nevertheless, after the start of the global financial crisis in 2007, the world cotton industry has also been experiencing turmoil as have been the other components of the world economy. In 2009- 10, the world cotton industry is expected to experience further negative aspects of the recession that has emerged as a result of the financial crisis. Pricing and production in the cotton industry in particular are expected to go face the negative effects. Nevertheless, international cotton trade is expected to recover, and mill use is expected to rise according to forecasts made by the International Cotton Advisory Committee (ICAC). World cotton trade is forecast seven per cent higher at 6.8 million tons, driven by an increase in imports by major consuming countries, which includes China.
The worrisome aspects are that world cotton area is expected to continue to decline to 30.4 million hectares in 2009- 10, which is the lowest area since 2002- 03. Also, the global cotton production is for 2009- 10 is estimated at 102.7 million bales four per cent lesser from a year ago. This displays the continuing trend of declining production which began in 2007- 08. The reduction in production has also been the case in China, in which the 2009- 10 production has been estimated at 31.5 million bales, 5.2 million bales lesser than that in the previous year. The Chinese government restricted the available supply of cotton within China in 2009 in order to support prices to producers. In addition to the effects of the government’s supply management programme, Chinese mills have had the difficulty of procurement of crops in 2009 because of the problematic harvest weather in some areas, and shortages of transportation from the Xinjiang region. Also, producers have been withholding cotton from the market in an attempt to maximise returns as prices rise.
As the global economy continues to recover, world cotton consumption is forecast to increase to 114.5 million bales. In China, consumption is expected to rise 4 per cent to 46.8 million bales in 2009- 10, as reported by the US Department of Agriculture (USDA). Cotton demand in China has increased largely, but faced with high cotton prices; mills have increased their imports of cotton yarn and substituted polyester where possible.
The rising costs of cotton production are a major concern for all producers around the world. Due to falling stocks, resilient import demands and heightened speculative interest, cotton prices have surged more than 40 per cent since mid July 2010. Nervousness about global shortages of cotton, textile mills around the world have propelled the process of fibres to their highest in more than a decade.
In China, the increases in the prices of raw materials are not the only concern for the textile industry. The harsh weather conditions also tamper with production in China. The Xinjiang Yangtze River cotton planting has been delayed by over a year which has lead to inadequate back up cotton production.
The major cotton producing regions in China are those of the Yellow River valley, the Yangtze River valley and the northwest regions of China. The Yellow River region includes the northern provinces of Shandong, Hebei, Henan, Shanxi, and Shaanxi, and the municipalities of Beijing and Tianjin. The Yangtze valley cotton area includes Jiangsu, Anhui, Hubei, Hunan, Jiangsi and Zhejiang provinces. The northwest region includes primarily the Xinjiang Uighur autonomous region along with the northwest Gansu province. Xinjiang’s remote location makes transportation important. Around 70 per cent of Xinjiang’s cotton crop is shipped to eastern provinces or to foreign destinations. Urumqi is linked to the Chinese rail network by a dual track system to Lanzhou in Gansu province. In the west and in the south (of Urumqi) transportation is mainly by highways and single track railroads. In order to ship their produce from their farms to the local gins, farmers use mules and light trucks. Thus transportation linkages between farmers and shipyards is a requirement in this region.
Keeping these in mind, it has been planned that the province of Guangdong will help the northwestern Xijniang region in establishing a major cotton manufacturing base. The base, located in Jiashi county of Xinjiang, with an estimated area of 200 hectares would be the largest in the region with abundant cotton resources after it is completed by 2011. The estimated cost of construction is 650 million Yuan (US$ 97 million), and will be funded by the Guangxin Foreign Trade Group Co. Ltd. And Guangzhou Suihua Clothing and Textiles Co. ltd. in Guangdong, as well as the county government of Jiashi.
According to expectations, the base would create 3500 new jobs in Jiashi, and would result in annual revenues of 1.5 billion Yuan. The development of the Xinjiang region has been a priority for the Chinese government.
China’s developmental model is based on the functioning of an export led economy. After the emergence of the recession after the onset of the global financial crisis, demands for Chinese exports from its most important trading partners such as the US, UK and Japan declined. In this backdrop, the Chinese government emphasised on increasing domestic consumption. Currently, the level of domestic consumption is 21 per cent. In order to maintain its manufacturing led growth, domestic consumption has to be increased to 65 per cent. However, the case of cotton presents a peculiar picture- the demand for cotton is high, but due to various factors; production not being high enough as a reason has led to China importing cotton from outside. Setting up of a cotton manufacturing base may be beneficial for China, as production of cotton may be stepped up. Also, transportation of cotton by farmers directly to the new manufacturing base in Xinjiang will entail a move away from the necessity of farmers having to transport their produce by mules and light trucks to shipping ports. The production of cotton is one of the world’s major agricultural commodities. It also provides economic support in whole or in part to about one sixth of the human populations worldwide. Setting up a manufacturing base in Xinjiang thus will be beneficial not just to the Chinese economy, but to the local farmers as well.
However, there are several questions that pertain regarding ecological degradation, when the issue of cotton production in China arises. In many places wherein the production of cotton is undertaken in China, irrigation diverts more water than is sustainably available. Also, farmers in China use greater levels of fertilisers and pesticides than farmers in sub- Saharran Africa. Also, the printing of textiles and dying have had adverse impacts on China’s water courses. Only 10 per cent of dye wastes are recycled, and about a third of the rest flows directly to the environment. In Xinjiang, such wastes are a major contributor to industrial and municipal pollution.
There have been several laudable environment policies in China. But the implementation of these policies depends on the local agencies. What has emerged as a result of the non implementation or limited implementation of these policies is a discord between the wants of the national government and those of the local governments.
As the global demand for cotton increases, China’s arable lands are under pressure from demands including those of food production and urban expansion. The idea of the manufacturing base in Xinjiang is creditworthy for the creation of jobs it will bring along with it, and because of the support it will provide to China’s cotton production. What is required is a specification of policies at the very outset of the creation of the base, on the use of pesticides, and the technologies that will be used in the production of cotton, so that environmental hazards do not emerge in the future from the new base.