Under the new circumstances, especially since the launch of the pilot reform of the target price policy, Xinjiang’s cotton industry has undergone significant changes.
First, the previous trend of continued expansion in cotton production has changed. In 2015, Xinjiang reduced its cotton planting area by 6.1 million mu. In 2016, local authorities in Xinjiang planned to further reduce the cotton planting area by 1.5 million mu. It was estimated that the total cotton planting area in 2016 would be more than 30 million mu, with cotton production becoming increasingly concentrated in regions with competitive advantages.
Second, cotton prices began to be determined mainly by the market. The pilot reform of the target price policy enabled the market to play a greater role in resource allocation and price determination. In 2015, the purchase price of seed cotton remained basically stable at around RMB 5.7 per kilogram, changing the previous situation in which cotton market prices fluctuated significantly from year to year.
Third, the comparative profitability of cotton planting continued to decline. Cotton production costs in Xinjiang are high, especially labor costs, and this problem is difficult to solve in the short term. Without income from target price subsidies, cotton farmers would find it difficult to sustain production.
Fourth, greater attention was paid to cotton quality. Since the pilot reform of the cotton target price policy, as the role of market mechanisms has gradually increased, greater attention has been paid to cotton quality in production, processing, and other stages. Processing techniques have been improved according to the requirements of textile enterprises. In the purchase of seed cotton, the previous practice of mixing different grades and excessively pursuing high lint percentages has also changed. Cotton is now graded and priced according to a combination of indicators such as lint percentage, staple length, and strength. As a result, the quality of Xinjiang cotton has begun to recover and improve.
Fifth, the various participants in the cotton industry chain began to interact more actively. The prices of seed cotton, lint cotton, and cotton yarn became more effectively connected and coordinated, while quality-based pricing became more prominent in the market and quality awareness among cotton-related enterprises improved significantly. Processing enterprises now face the market directly and bear the risks of market fluctuations. They have also established industrial alliances with producers and seed companies to improve processing quality and ensure cotton quality. The textile and apparel industry is also accelerating upgrading and transformation, developing medium- and high-end markets, optimizing internal management, and reducing operating costs. With the advancement of the “Belt and Road” Initiative, the connection between domestic and international cotton markets will become even stronger, Xinjiang cotton.