CHINA’S COTTON INDUSTRY has run head-first into the law of unintended consequences. In 2012, the world’s largest cotton importer bought millions of tones of cotton fibre from local farmers to stockpile in an effort to drive up rural incomes, particularly in Xinjiang. Domestic cotton prices hit 40% above global market prices. China’s textile mills, unable to buy freely on world markets because of import quotas, cried foul — or at least those that had not gone out of business because they were no longer price competitive. Stocks reached a peak of 10.5m tones, accounting for more than half world inventories and one and two third times 2013’s total crop — 6.3m tonnes, down 7.7% from the previous year, according to official data published this week.
After unloading some of the cotton at a loss over the course of last year and months of head scratching over what to do with all the rest, authorities have now decided to scrap the scheme in favor of direct subsidies to cotton farmers next year starting with a pilot scheme in Xinjiang. Details of the size and scale of the subsidies remain unclear, however. The stockpiling scheme for soy will also cease, but those for wheat, rice, corn, rapeseed and sugar, which have not experienced cotton’s problems, will continue.