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China Cracks Down on Sale of Imported Cotton to State Reserves

Dec. 10 (Bloomberg) -- China banned two companies from selling cotton to state reserves after finding imported fiber disguised as local produce.

Two companies based in Henan province mixed imported cotton with locally produced fiber to sell to China National Cotton Reserves Corp. to profit from cheaper overseas supplies, the China Fiber Inspection Bureau said in a statement dated Dec. 6.

Cotton in China has been on average 74 percent more expensive than overseas in the past year as the government hoarded local fiber and imposed quotas on imports to aid farmers. Futures in New York have tumbled 63 percent from a record $2.197 a pound in 2011 as global production exceeded demand for a fourth year.

The inspection bureau found signs that the two companies tampered with their production lines to blend foreign fiber with local cotton, according to the statement.

China has pledged to buy an unlimited amount of local cotton this year at 20,400 yuan a metric ton, 48 percent more expensive than foreign fiber shipped to China - quoted at 13,789 yuan at Chinese ports on Nov. 29 based on a 1 percent import duty, according to The nation has already bought 3.64 million tons of this year’s harvest as of yesterday, according to estimates by the website.

China will have 12.6 million tons of cotton stockpiled by July 31, 62 percent of the global inventory and more than the country’s annual requirement, according to U.S. Department of Agriculture estimates.

To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at

To contact the editor responsible for this story: Jarrett Banks at

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