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Chinese firms find Indian cotton yarn lucrative

30
Jul '12
More and more Chinese enterprises are resorting to import of cotton yarn, especially from India in recent months.
 
Firstly, India has the advantage of the low cost of raw material. For example, the difference between the price of China’s cotton grade 328 and that of Indian cotton price of the same grade varies from about 3000 Yuan/ton to about 10,000 Yuan/ton. 
 
Under the cotton quota system, there is a limited scope for low-cost foreign cotton to enter China. Hence, domestic textile enterprises prefer to import cotton yarn as that would be cheaper than buying domestic cotton at high prices and turning them to yarn.
 
Secondly, China’s advantages in labour cost are gradually weakening. The cost of labour is relatively less in India compared to those in China.
 
So, cotton yarn imported from India has obvious advantage over Chinese domestic yarn in price. For example, the price difference between Chinese C21s and C21 yarn made in India is 1800 Yuan/ton.
 
Thirdly, the current exchange rate is also further helping the Indian cotton yarn become lucrative for Chinese textile enterprises.
 
Since 2010, the Renminbi has been appreciating against the US dollar. On the other hand, the Indian rupee has been gradually depreciating since about a year, which has increased the competitiveness of Indian goods, including cotton yarn.
 

Fibre2fashion News Desk - India


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