A new report from CottonConnect, a global organization committed to helping build a transparent and sustainable cotton supply chain, details how Chinese government reforms are creating significant opportunities for brands to help build a stronger supply chain in the country.
The report, “China’s Cotton: A Growing Market Opportunity,” says the shifting cotton market in China offers a valuable window of opportunity for international companies to invest and build a more resilient cotton supply chain in one of the world’s fastest-growing cotton markets.
The report, released Wednesday night, outlines the urgency of brands and retailers to show leadership at a strategic and farm level by leveraging technical, financial and political support for the industry, as well as providing urgent assistance at the farm level to help build a successful supply chain in China.
Chinese government subsidy reforms last year, notably the withdrawal of its cotton reserve policy, triggered a major downward shift in prices for cotton, which fell about 60 percent in the last nine months of 2014, according to the China Cotton Association’s price index. In its latest Cotlook A index, the International Cotton Advisory Committee has cut its forecast for the season-average value of China’s cotton by 4 cents to 68 cents a pound, the weakest price in six years.
China is now the world’s largest producer, importer and consumer of cotton, holding 58 percent of the world’s stockpile of the raw material, according to ICAC. Since China’s accession to the World Trade Organization in 2001, its textile and apparel exports have increased 50 percent and the nation has doubled its share of global exports in less than a decade to about 25 percent.
However, at the farm level, cotton is becoming a less appealing crop for farmers, CottonConnect said, with plantings predicted to fall 6 percent to 31.6 million hectares across China in 2015-16, according to ICAC, if intervention does not occur. CottonConnect warns that more support is needed for small-holder cotton farmers across the country as they continue to grapple with environmental, economic and social challenges. On top of falling prices, growers are also struggling with changing rural demographics, an emerging water crisis, rising labor costs and a lack of access to credit and financial literacy.
China supports 20 percent of the world’s population with just 7 percent of the world’s water resources. Labor accounts for more than two-thirds of farming costs in China, with minimum wages increasing at a rate of more than 10 percent a year in the past five years, CottonConnect noted.
Alison Ward, chief executive officer of CottonConnect, which has offices in China, India and the U.K., said: “As the biggest market for cotton in the world, international brands have a vested interest in ensuring that the market and supply chain is thriving. The Chinese cotton industry has reached a pivotal point. There is a growing need and a huge opportunity for international and leading Chinese brands to support the cotton sector in this time of transition by showing leadership, collaborating with others and investing to help build a more sustainable cotton industry for the future.”
The report stresses that thanks to low cotton prices, brands and retailers have a significant and strategic opportunity to show leadership by improving relationships with cotton farmers on the ground and sharing best practices in basic agricultural techniques and technologies in China’s key cotton-growing regions.
The report notes that a cheaper, better-quality cotton sourced and processed in China could create greater efficiencies for global brands sourcing from and selling to the Chinese market. It also highlights that China’s most recent five-year plan sets out expectations for cleaner, greener growth in the textile sector, greener and more productive agriculture, better water protection and rural regeneration, offering brands a chance to demonstrate leadership and safeguard their license to operate in China.
CottonConnect has worked with 130,000 cotton farmers and their families in China, India and Pakistan, proving that basic interventions can make a huge difference to the livelihoods of cotton growers. The organization has collaborated with major brands, including Primark, John Lewis and C&A Foundation, to help improve the resilience of cotton supply chains in cotton-growing regions across the developing world.