China's monetary policy may impact local cotton industry

31 Jul '13

2 min read

China’s efforts to reduce the rush of bank loans through its latest policy initiatives could lead to unforeseen effects on the cotton market, according to industry analysts.

The move would also affect the imports of cotton as it would encourage the domestic textile mills of the country to import more foreign cotton, they add.

In June 2013, the People’s Bank of China announced its intention to tighten the monetary policy in order to achieve a more stable economic growth, a move aimed at curbing the risks of bank loans.

The move by the People’s Bank would have a direct impact on the cotton industry in China, as it would decrease the interest of domestic cotton textile mills in purchasing domestic cotton, and increase their interest in buying foreign cotton, as it would become cheaper to buy foreign cotton even after including tariffs.

The new policy already had an immediate impact on spinners who are reducing purchases from the state reserves, which require payment upon delivery, and expanding imports with 90-day letters of credit, the International Cotton Advisory Committee (ICAC) said in a recent statement.

Earlier this month, China announced that for import and export of cotton by the textile industry, tariff rate will be calculated on the basis of 1 US dollar = 6.1652 yuan for the month of August 2013.

Tariff on cotton imports by China for the month of July was calculated on the basis of 1 US dollar = 6.1677 yuan.

Fibre2fashion News Desk - India

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