Government and Policy

China to build cotton reserve system

Updated: 2011-04-01 07:09
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BEIJING - The Chinese government announced Thursday that it will initiate a cotton purchasing and reserve program starting this fall to boost domestic cotton production.

To build the reserve, the government plans to purchase standard cotton at 19,800 yuan ($3,018) per ton from Sept 1 this year to March 31 next year, according to a statement from the National Development and Reform Commission, the country's top economic planner.

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According to the program jointly established by eight ministries and institutions, China National Cotton Reserves Corporation will be responsible for purchasing cotton during the seven-month period when market cotton prices fall below the state purchase price for five working days. On the other hand, the company can sell cotton reserves when necessary.

The statement came just before Chinese farmers begin this year's cotton planting, in an effort to help them avoid cotton price fluctuations and stabilize output.

The latest survey from the China Cotton Association showed that due to rising costs and lower economic efficiency, China's cotton growth acreage is estimated to increase only 5.1 percent year-on-year to 5.4 million hectares this year, down from the previous estimation of 9.8 percent in January.

China had occasionally conducted temporary cotton purchase and reserve programs in the country's major cotton belt since 1999, but this is the first time that a purchase price is announced before the program starts.

The early announcement of the program and purchase price helps farmers and cotton companies set production plans and protect the interests of cotton producers, said the statement.

Cotton futures at the Zhengzhou Commodity Exchange dropped 1.65 percent to 28,400 yuan per ton on Thursday.