Cotton Industry in China sample essay

It is common knowledge that China is one of the biggest exporters of textiles to Western countries including the United States. But in order to produce that much textile products, the Chinese require raw materials, the most important of which is cotton. There are over 50 million cotton farmers across China and over 17 million acres of cotton sown area (1984 data, CnCotton, 2003). Chinese cotton production has experienced dramatic changes since the middle 1900’s, which include policy changes, and agricultural and general economic reforms. The entire cotton industry has recently started to move towards a market-orientated system, leaving centrally controlled system in the past. This move, in turn, required many complex series of changes, which influence the growers of cotton – the farmers – the consumers, entire cotton production industry, and economy at large.

At the end of the 20th century cotton industry in China had a significant surplus of cotton, meaning the supply being much higher than demand. This trend in the industry required immediate regulation, because the entire industry would have suffered much unless it was “let go.” The steps towards liberalization of the market had been taken immediately. The government discouraged production of cotton (or at least discouraged industry growth pace). Later, with still huge amounts of cotton at hand, the government passed a policy that allows all textile companies to purchase cotton directly from growers. This is an important step, because previously this supply chain had been regulated by the government authorized institutions. And after the passing of that policy, all types of textile businesses (privately owned or state firms) were allowed to buy cotton from farmers, growers’ association, or the Supply and Marketing Cooperatives (SMC). Another important step toward market-oriented system was the abolition of price regulations. Although still the government sets the reference price for cotton, in reality the price is determined by the market only.

It is important to note that although the cotton market by 2002 has been rapidly moving the market-oriented system, still there were many obstacles. Some of these obstacles were short-term businesses that violated quality standards and delivered low quality cotton to the market, which caused halt in the move to the free market system. Another obstacle, which was even more significant, was the trans-regional trade of cotton within the country. Local regional authorities have intervened in the trading processes, if the customer firm arrived from another region than that of the supplier. These interventions were aimed at protecting and promoting local market development. However these intrusions diminished the nation-wide trade, and thus influenced the entire economy in a negative way. The federal government has identified the problem and immediately started a campaign to “fight against this kind of malpractice by local authorities in marketing agricultural and other products” (CnCotton, 2003). This step was also very important, because it liberated the market for free trade across the entire country.

All the changes mentioned above have influenced the entire industry of cotton production. Previously, however, the industry was influenced even more, because of the direct intrusion of the government in to the trading processes. Production since 1970’s has been changing significantly over time due to these intrusions and natural phenomena: price policies, changes in cotton sown areas, change from management end, natural conditions like weather, and technological agricultural progress. Peak of the production was in 1984, and major downfall was in 1999. Since then, the price for cotton gradually raised from the previously regulated level, which naturally promoted growing more cotton. In addition to the more or less favorable conditions, the demand for cotton from textile companies also stimulated production. This rise in price and demand caused the increase of sown areas by the beginning of the new millennium.

Interestingly, since 1980’s there was a significant and apparent shift of production between regions in China. The country is divided into three big regions of production: West, Central, and North. North regions have always been most productive, and Central part following with a slight margin. However, the production in the Western region Xinjiang (which accounts for almost all Western production) has been growing gradually from 0.08 million tons in 1978 to almost 1.5 tons in 2000 (CnCotton, 2003). This shift is caused by less strict regulations and policies in the Western region, than in the rest of the country.

Ultimately, Chinese cotton production has survived many unfavorable and favorable times, and finally it reached the state of market-oriented system. Although the quality issues of the cotton still remain, the government is implementing measures to control and improve the quality of cotton traded within the country and one for export. Cotton industry is developing and growing, and nowadays it accounts for a significant part of Chinese economy.

Bibliography

• Cotton production, demand, and trade in China. (2003). CnCotton. Retrieved May 30th, 2006 from http://www.cncotton.com:8088/chinacotton/c_production.asp

• China cotton industry. (2003). CnCotton. Retrieved May 30th, 2006 from http://www.cncotton.com:8088/chinacotton/c_Industry.asp
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