There has been a notable change in the world textile industry in the past 20 years. It has changed from being dominated by United States in cotton export market to China becoming the market leader in cotton imports and synthetic fibres. Today, China dominates the world cotton market. Chinese cotton policies not only affect their domestic market but also the global cotton market.
Since December 2001, when China rose to a powerful position in the World Trade Organization (WTO), the growth of Chinese textile industry has become a dominant factor in influencing the world cotton and textile markets. China has been demonstrating its manufacturing skill in consumer products since 1980's. Due to MFA (Multi fibre arrangement) restrictions, the rules for T&A (textile and apparel) differed from other products.
Now that the T&A rules are more aligned with the rules of other governing products, production will place China in an advantageous position. This will have an important implication on the world cotton markets. It has been noticed that for the last 20 years fluctuation in China's import for cotton brought fluctuations in the world's cotton price.
China has the ability to increase cotton production and cater the growing demand of cotton. This will largely affect the prospects of cotton exporters like United States. Except for countries like China, the United States, India and Brazil, who are already among the largest producers; for the last two decades, production has remained at an average level for most of the cotton growing countries.
Mill used for cotton has increased in China, India and Pakistan and decreased in the United States and the European Union. Two general factors have brought changes in the global cotton market. One includes changes that affect many industries and other includes factors that specifically affect cotton and textiles. Technological developments have improved communication which has largely affected general trade.
Technological innovation in cotton production and marketing is available quickly at lower costs. The cotton and textile market has been affected by low labor cost nations like China, India, Pakistan, Taiwan, South Korea and Turkey. Moreover, cotton market changes have been significantly affected by biotechnology. Higher cotton production in Brazil was the result of increase land clearing. Nevertheless, higher production comes from better yields and much of it comes from bio-tech varieties.
For more than 4 decades China has been the world's largest producer of cotton. China grows more cotton than it consumes. Since 2011-2012, China's share in the global harvest is 28%; India, the second largest producer produces 24%, while U.S. which is the third largest producer produces 13%.
If the mill use is considered, the amount of raw fiber spun into yarn, one can see that China has 35% of world's total mill use. Even though China is at the top in cotton production than any other country, still it is unable to fully supply to its mills. As a result China is also world's largest cotton importer.