Required Report - public distribution

**Date:** 5/1/2004

**GAIN Report Number:** CH4013

CH4100

**China, Peoples Republic of**

**Cotton and Products**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Maurice W. House

U.S. Embassy, Beijing

**Prepared by:**

Jim Butterworth & Wu Xinping

**Report Highlights:**

MY04 imports are forecast at 1.1 MMT (5.0 million bales) and production
is forecast at 6.8 MMT (28.2 million bales). The United States is
expected to remain the dominant source of cotton imports. The textile
industry is expected to continue expanding at a healthy pace. Stocks are
expected to remain tight.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Beijing \[CH1\]

\[CH\]

Table of Contents

[**Executive Summary 3**](#executive-summary)

[Production 3](#production)

[Consumption 6](#consumption)

[Trade 7](#trade)

[Stocks 8](#stocks)

[Policy 8](#policy)

[Marketing 10](#marketing)

[Tables 12](#tables)

[Production, Supply, and Demand (PSD)
12](#production-supply-and-demand-psd)

[Table 1. PSD in Metric Tons 12](#table-1.-psd-in-metric-tons)

[Table 2. PSD in Bales 13](#table-2.-psd-in-bales)

[Trade Tables 14](#trade-tables)

[Table 3. China's Monthly Cotton Imports
14](#table-3.-chinas-monthly-cotton-imports)

[Table 4. China's Quarterly Cotton Imports by Country of Origin
15](#table-4.-chinas-quarterly-cotton-imports-by-country-of-origin)

[Table 5. China\'s Monthly Cotton Exports
16](#table-5.-chinas-monthly-cotton-exports)

[Table 6. China\'s Quarterly Cotton Exports by Destination
17](#table-6.-chinas-quarterly-cotton-exports-by-destination)

[Table 7. China's Monthly Cotton Yarn and Thread Imports
18](#table-7.-chinas-monthly-cotton-yarn-and-thread-imports)

[Table 8. China's Quarterly Cotton Yarn and Thread Imports by Country of
Origin
19](#table-8.-chinas-quarterly-cotton-yarn-and-thread-imports-by-country-of-origin)

[Table 9. China's Monthly Cotton Yarn & Thread Exports
20](#table-9.-chinas-monthly-cotton-yarn-thread-exports)

[Table 10. China's Quarterly Cotton Yarn and Threads Exports by
Destination
21](#table-10.-chinas-quarterly-cotton-yarn-and-threads-exports-by-destination)

[Table 11. China's Monthly Cotton Fabric Imports
22](#table-11.-chinas-monthly-cotton-fabric-imports)

[Table 12. China's Quarterly Cotton Fabric Imports by Country of Origin
23](#table-12.-chinas-quarterly-cotton-fabric-imports-by-country-of-origin)

[Table 13. China's Monthly Cotton Fabric Exports
24](#table-13.-chinas-monthly-cotton-fabric-exports)

[Table 14. China's Quarterly Cotton Fabric Exports by Destination
25](#table-14.-chinas-quarterly-cotton-fabric-exports-by-destination)

[Table 15. Cotton Planted Area and Production by Province
26](#table-15.-cotton-planted-area-and-production-by-province)

[Table 16. Cotton Tariffs as of January 1, 2004
27](#table-16.-cotton-tariffs-as-of-january-1-2004)

[Table 17. Cotton Tariff Rate Quotas
28](#table-17.-cotton-tariff-rate-quotas)

# Executive Summary

Production during MY04/05 is forecast to reach a recent record of 6.2
MMT due to a 12.5 percent increase in planted area and an expected
return to normal yields. Excessive moisture last year severely
suppressed yields in several major growing areas. This sharp increase in
production is expected to reduce total imports to 1.1 million metric
tons (MMT). The booming textile sector will absorb some of the increased
domestic production, but stocks are forecast to remain very tight. The
State Reserve stocks are estimated to be practically nothing. If Reserve
officials decide to replenish their stocks, imports may exceed Post's
forecast.

# Production

*Overview:* MY04/05 production is forecast at 6.2 MMT. Planted area is
forecast to increase 12.5 percent over MY03/04 to 5.75 MHa. This is on
top of last year's 22 percent increase in planted area. The total
production forecast is based on average yields. Some sources are
forecasting even higher planted area. It is Post's view that these
forecasts are excessive. The government is pressuring farmers to plant
more grains and less cotton to rebuild the low grain reserves. Although
the provincial Agricultural Bureaus have few real policy tools to force
farmers to plant less cotton, there have been a number of
well-publicized, nominal cash subsidies and agricultural tax reduction
programs to farmers who comply. The qualification details of these
programs are less well publicized. Perhaps more important than these
nominal subsidies are farmers' memories of past low cotton prices that
followed high prices the previous year. Many small farmers, especially
in Shandong province, are afraid to "put all their eggs in one basket,"
so they will diversify their plantings. Also, Shandong farmers recall
last years' flood-related losses and quality problems that were not
totally offset by the high cotton price. These cautionary factors aside,
as the table below shows, cotton still is one of the most profitable
crops farmers can grow.

Post's estimates for MY03/04 and MY02/03 are consistent with current
USDA official estimates. It should be noted, however, that several
industry sources opined that the MY03/04 production estimate, 4.87 MMT,
which is based on China's National Statistics Bureau (NSB) data, is
higher than what was actually produced. For the sake of consistency,
Post accepts NSB's data.

Xinjiang will remain the dominant cotton-producing province, followed by
Hebei and Shandong.

## 

*Planted Area* -- It is not a question of whether planted area will
increase in MY04/05 \-- it is just a matter of how much. There is a
healthy divergence of opinions on that point, but most fall in the range
of 10-15 percent. The table below summarizes a few of the publicly
available estimates:

Table A. A Comparison of Survey Results from Three Official Sources

+------------------------+---------------------+-----------------------+
| Source                 | Acreage forecast    | Percentage Increase   |
|                        |                     | from MY03/04          |
|                        | (Million ha.)       |                       |
+------------------------+---------------------+-----------------------+
| China Cotton           | 5.6 to 5.87         | 10-15%                |
| Association            |                     |                       |
+------------------------+---------------------+-----------------------+
| MOA                    | Over 5.53           | 9.2%                  |
+------------------------+---------------------+-----------------------+
| State Cotton Market    | 5.82                | 14%                   |
| Monitoring Network     |                     |                       |
+------------------------+---------------------+-----------------------+

Among the leading producing provinces, Hebei has the highest growth rate
at about 30 percent, followed by Shandong 19 percent. In the Yangtze
River Reaches, except Anhui, where very low yields last year prompted
farmers to reduce rather than increase planted area, others are to
increase with the highest at 23.6 percent in Jiangsu; In Northwest,
growth rate for Xinjiang averaged at 8.6 percent with moderate growth
for the Production and Construction Corp (PCC).

Also, a reliable source conducted random interviews of Xinjiang and
Shandong farmers and found planting intentions would increase by 29
percent and 26 percent respectively. It should be noted that the
Xinjiang survey only included farmers on the small non-PCC farms.
Official sources forecast planted area on the PCC farms, which account
for the bulk of Xinjiang's production, to increase modestly. A few
farmers in both provinces said they intend to expand area by reclaiming
abandoned marginal land. In Shandong and other provinces, where there is
considerable competition among crops for limited land, more land was
reserved this year than last year for intercropping (wheat or garlic or
onions plus cotton). In the case of intercropping with winter wheat,
farmers would have had to set aside land for cotton and other crops last
fall.

Fearing excessive expansion of planted area, several government and
quasi-government agencies, including CCA, State Cotton and Jute Bureau
(SCJB) used the state-run media to remind farmers of the risks related
to over expansion of cotton acreage from a global supply/demand
prospective.

Also, a meeting of the cotton-related agencies was called to analyze the
cotton market and production situation. The meeting concluded that, "...
given the high growth of cotton consumption, coupled with the unexpected
lower production in MY03, and based on the State Plan for Advantaged
Crops, China should develop cotton production smoothly and achieve
supply and demand equilibrium by relying on domestic production and make
use of global market supplies." Simply put, they concluded that it would
be best to let market forces correct any imbalances.

Almost all sources agreed that the price spike that occurred between
fall 2003 and now, which averaged between 30 and 50 percent, is driving
cotton area expansion. NSB's 2003 annual statistics pegged the price
increase at 35.3 percent. According to a media survey, profit for cotton
was the highest among all crops in 2003 (see Table 2). Despite this, the
government has intensified its efforts to increase grain production
through the reduction or elimination of the agriculture tax in major
grain provinces, together with special subsides. Most farmers' planting
plans are unlikely to be affected as decisions were made earlier; this
is particularly true in provinces where options for various crops are
possible.

Table B. The Relative Profitability of Cotton and Grain crops in 2003

\[RMB/Chinese Mu (15 mu = 1 HA)\]

  ------------- ----------- ----------- ----------- ----------- ------------
                Wheat       Rice        Corn        Soybean     Cotton

  North         144.03      /           109.51      221.75      **809.29**

  Southeast     /           95.95       /           /           **893.31**

  Central       71.25       172.97      88.02       159.1       **678.23**

  Northwest     88.72       /           217.85      /           **728.71**
  ------------- ----------- ----------- ----------- ----------- ------------

Notes: Out of the 8767 households (farmers) surveyed in four regions,
1681 planted cotton.

Source: *Farmer's Daily*

*Yields* - As of this writing, sowing is complete in most provinces and
the weather was normal throughout the planting period. Based on the
average yields in the past five years and post forecast acreage of 5.75
MHa, production is forecast at 6.15 MMT. If one omits the 2003 yield
from the average yield calculation, the 2004 crop could reach a recent
historic high.

Table 3 China's Cotton Area, Production and Yields from 1999 to 2004

+--------------------+------+-------+--------+--------+------+--------+
| Year               | 1999 | 2000  | 2001   | 2002   | 2003 | 2004   |
+--------------------+------+-------+--------+--------+------+--------+
|                    |      |       |        |        |      |        |
+--------------------+------+-------+--------+--------+------+--------+
| Acreage (1000 Ha)  | 3    | 4,041 | 4,810  | 4,184  | 5    | 5      |
|                    | ,726 |       |        |        | ,110 | ,823\* |
+--------------------+------+-------+--------+--------+------+--------+
| Total production   | 3    | 4,417 | 5,324  | 4,916  | 4    | 6,2    |
| (1000 MT)          | ,829 |       |        |        | ,870 | 36\*\* |
+--------------------+------+-------+--------+--------+------+--------+
| Average Yield      | 1    | 1.093 | 1.107  | 1.175  | 0    | 1.071  |
| (MT/Ha)            | .028 |       |        |        | .953 |        |
+--------------------+------+-------+--------+--------+------+--------+
| \*Unofficial       |      |       |        |        |      |        |
| government         |      |       |        |        |      |        |
| forecast published |      |       |        |        |      |        |
| in newsletter.     |      |       |        |        |      |        |
|                    |      |       |        |        |      |        |
| \*\*The production |      |       |        |        |      |        |
| for 2004 is Based  |      |       |        |        |      |        |
| on the recent five |      |       |        |        |      |        |
| years average      |      |       |        |        |      |        |
| yield at 1.071 MT  |      |       |        |        |      |        |
| per hectare.       |      |       |        |        |      |        |
+--------------------+------+-------+--------+--------+------+--------+

Most industry insiders and experts opined that NSB's production estimate
of 4.87 MMT for MY03 announced by NSB was believed on the high side by.
Average yield dropped to about 953 kg per ha, the lowest in the past
five years. Yields in Henan and Anhui were especially hard hit -- they
plummeted by 58.5 percent and 41 percent respectively; Jiangsu and
Shandong also recorded lower than average yields. Excessive moisture in
the early growing and maturing periods attributed to the poor harvest.
In MY03, marketing of the new crop was delayed for nearly twenty days
due to abnormal weather. Except Xinjiang, quality declined dramatically
compared to the previous year.

*Production Practices and Inputs* \-- Field agronomy practices continued
to improve last year. Seedling transplanting was used on 95 percent of
the planted area and plastic film covering reached 44 percent. In
Xinjiang's state-run PCC farms, high planting density, standardized
varieties planted on a relatively large scale, together with improved
irrigation systems, have reduced water wastage and ensured stable
yields. Non-PCC farms, however, produced lower yields, mainly due to
scrimping on fertilizer use and other less than optimal field management
practices.

The current forecast area also is achievable in terms of agriculture
inputs. There were reports saying seed shortage caused by excessive
moisture last year resulted in 50 percent supply gap in the Yellow and
Yangtze Rivers Reaches. Recent survey and Post's field interviews
indicate that the seed situation was not as tight as reported, because
of good seed production in Xinjiang. Total seed available exceeded
120,000 MT in Xinjiang, while the estimated total national demand is
220,000 MT. Seed traders reportedly anticipated increased demand this
year so they started marketing seeds earlier than usual. A MOA official
indicated the cottonseed supply could be somewhat tight but not for the
leading producing provinces. A newly released survey result showed 94.7
percent of the surveyed samples met MOA's cottonseed quality standard,
which was 6.3 percent higher than last year. Other materials, such as
fertilizer, were in ample supply, although farmers complained about high
prices. In response these high prices, NDRC issued a circular in
mid-March to curb the price surge for fertilizer and chemicals. The
circular contained authorized resumption of a tax rebate to fertilizer
producers and imposed an ex-factory price ceiling for fertilizers.

Transgenic Bt cotton planting continued to take more ground in MY03 and
is expected to expand further in MY04. However, it remains difficult to
predict the real area share of Bt varieties. Although only officially
approved for planting in four provinces, in fact, it is grown much more
widely. Consequently, estimates for BT cotton coverage vary from as low
as 22.4 percent to over 70 percent. According to China Academy of
Agricultural Sciences (CAAS), government-approved BT varieties covered
around 1.15 MHa or 22.4 percent of total cotton planted area in MY03, of
which 5 US BT varieties were planted on 0.885 MHa, representing 76.8
percent, in comparison to 23.2 percent for domestic BT varieties. China
Textile News reported over 70 percent of the area was planted to Bt
varieties (domestic and imported varieties) in MY03, out of which
domestic Bt varieties were planted on about 1.33 MHa, or 26 percent of
the total planted area. Official sources estimated that Bt varieties
covered around 50 percent of the MY03 national acreage, and it is
expected to grow in the foreseeable future. Regular and crossbred
varieties dominate and continue to increase. In terms of regional
distribution, one official source said that Bt varieties covered 90
percent and 80 percent in the Yellow and Yangtze River reaches
respectively. In Xinjiang, BT cotton was rarely planted. Local farmers
showed little awareness and said the prevailing varieties require 3 to 4
chemical applications per season, mainly targeting aphids. On the other
hand, there is report saying the government decided not to plant BT
cotton in Xinjiang because it's less useful as compared with other
provinces. Additionally, there are reports saying China's Bt cotton
breeders started joint projects with Indian firms to promote their Bt
varieties abroad.

CAAS complained that many varieties labeled as "Bt cotton" have entered
the market recently without proper evaluation and approval. This puts
pressure on breeders and reflects badly on the overall reputation of BT
cotton. Experts appealed for strict measures to regulate the evaluation
and market access for such varieties.

In MY03 19 percent more farmers bought cottonseed from market/seed
agents than in MY02. The total reportedly is up to 56 percent.
Utilization of seeds from the prior years' crop and seeds supplied by
government-designated agents is declining.

Manual harvesting is likely to continue in the near future because labor
costs are low and small plot sizes. Furthermore, China's current
production and processing system is totally geared for hand picked
cotton.

*Cotton Quality* - According to textile industry sources, cotton quality
in MY03 was worse than in MY02 because the foreign fiber content
increased. Some mills complained that even PCC cotton from Xinjiang,
which normally is quite clean, contained above normal content of trash
and foreign fibers. This quality decline can be attributed to the tight
cotton supplies.

*Colored Cotton* \-- Area planted to colored cotton was estimated at
about 15,000 hectares in MY03. One company located in Xinjiang is the
leading player in developing varieties and producing such cotton.
Production was estimated at less than 10,000 MT in MY03. Problems such
as fiber quality, limited color range, and lower yields than normal
cotton are hampering further development of this specialty sector.

# Consumption

Consumption is forecast to increase to 7.1 MMT from 6.8 MMT in MY03/04.
This is a 4.4 percent increase, which is consistent with the estimated
4.6 percent growth between MY02/03 and MY03/04. The textile industry
continues to expand. The high consumption in MY03 was driven mainly by
the skyrocketing exports of textile products. According to China Textile
Industry Council (CTIC), China's textile and apparel products exports
were valued at US\$80.5 billion in CY03 \-- up by 24 percent as compared
with CY02. While cotton textile products exports value reached US\$10.8
billion, increased by 29 percent compared to CY02. In CY03, exports to
ASEAN, EU markets surged by 48 percent and 43 percent respectively,
followed by US with 28 percent growth rate. The textile industry has
continued to grow in the first quarter of CY04, in particular to the
U.S. market. Textile apparel exports during the period reached US\$19.3
billion, which is 25 percent more than during the first quarter of CY03.
Encouraged by the prospects of elimination of quotas from 2005,
investment in textile sector continues to boom. According to NDRC's Feb
2004 Economic Report, investment in textile industry for the first two
months of 2004 surged by 144 percent as compared to the corresponding
period of the previous year. On the other hand, the continued high GDP
growth rate of 9.1 percent boosted domestic demand for cotton textile
products as well. Yarn production was estimated to increase by 10
percent to reach 9.7 MMT in MY03. Some industry insiders, however,
anticipated the cotton textile sector's high growth rate might fall in
MY04. A portion of the high cotton prices since CY03 will have to be
passed along to textile consumers, which ultimately will reduce sales in
MY04. The mills, however, will have to absorb a portion of the cost,
which will reduce their profits. The reduced tax rebate (from 17 to 13
percent) effective from January 01, 2004, eroded profits for the sector
and reduced the competitiveness in global market. Meanwhile, a
Cncotton.com survey conducted in March 04, showed a declining trend of
proportion for cotton fiber in January and started to grow in March (see
detailed discussion below). Moreover, the safeguards imposed by major
importers also will have a direct negative impact on cotton consumption.
Post's MY04 consumption forecast of 7.1 MMT takes these factors into
account.

*Fiber Content* - Man-made fiber production reached 11.6 MMT in 2003, up
by 17 percent as compared to 2002, representing about one-third of the
world's total. The growth rate was 5 percent higher than that of yarn
production at 12 percent. A well-informed industry source said man-made
fiber accounted for 65 percent of total fiber production in 2002 and it
could be even higher in 2003, though no specific figure is available.
Some 55 percent of man-made fiber was used for apparel manufacturing in
2002, and was expected to have gone up in 2003 partly due to continued
high cotton prices. It is difficult, however, to estimate to what extent
the high cotton price affected the man-made fiber's share in textile
manufacturing. A survey conducted in Jan 04 by Cncotton, found that 65
percent of the interviewed mills reported reduced cotton consumption in
the last quarter of 2003. The reason was said to be restructuring
products or man-made fiber substitution. A survey carried out in March
2004, indicated the percentage of mills increasing the use of man-made
short fiber was higher than those of cotton. Obviously, even a one
percent increase in the use of man-made fiber in textiles would result
in a significant reduction in cotton consumption. This is consistent
with what several large textile manufacturers told Post in early April
04.

*More Spindles* - As of the end of 2003, China's total spindles were
estimated to exceed 60 million, up by 10 million over 2002, according to
official media quoted NDRC source. The estimated 10 million new spindles
mainly invested by private sector were put into operation before the end
of 2003. These newly installed spindles are technically advanced
imposing pressure on the existing mills (mainly SOE). Spindle expansion
was characterized by concentration on the coastal areas and
privatization. Several large players in Shandong and Jiangsu provinces
exceeded one million spindles. The high growth of spindles was
accompanied by a surge in investment in the textile sector in 2003. The
total investment hit US\$6.6 billion, up 74 percent over previous year
and similar growth has continued in the first two months of 2004. Fiber
consumption per capita also rose to 10.8 kg in 2003, slightly above the
world average.

# Trade

*Imports* - Imports for MY04/05 are forecast at 1.1 MMT. This is 39
percent less than Post's MY03/04 estimate. Most of the decrease can be
attributed to the sharp increase in China's production. Despite the
decrease, the United States is expected to remain the dominant supplier.
The rapid increase of imports in MY03 was a direct consequence of
textile industry's strong growth, which drove up cotton consumption to a
record level. At the same time, domestic production was sharply lower as
a result of too much moisture in several leading producing provinces,
where yields hit five-year lows. As for forecast imports in MY04, most
industry sources believe consumption would grow moderately. A return to
normal domestic production will also create uncertainty for imports
until farmers' planting intention become clear. Another important factor
is what level of ending stocks the government intends to maintain. The
lack of reserve stocks, which limited the governments ability to manage
last year's price spike, might prompt China to raise the current low
reserve stocks to more comfortable levels. Taking all these factors into
account and assuming normal weather and yields leads to a forecast of
1.1 MMT of imports in MY04.

Origins of imports in CY03 remained similar to those in CY02, with the
Unites States and Uzbekistan as the top suppliers. Among the other
suppliers, imports from Cote d' lvoire have grown in the first quarter
of CY04. Along with the rapid increase of imports, however, complaints
about the quality of imported cotton reportedly grew as well. Many
merchants opined that these problems were commercial issues, and to a
certain extent caused by the differences between the U.S. and Chinese
classification systems.

*Exports* - Exports are and will remain insignificant into the
foreseeable future. China needs all the cotton it can get -- it has
little left over to export, except during certain market anomalies.

# Stocks

Stocks currently are very tight and are forecast to remain tight in
MY04/05. Post estimates ending stocks for MY03 will be 1.5 MMT, while
ending stock for MY04 to be 1.62 MMT, depending on mainly the domestic
production and how much China will replenish its State Reserve. The
large Chinese crop is expected to attribute to a nominal increase in
MY04/05 ending stocks. Although estimates from different sources vary
widely, most sources forecast ending stock for MY04 will increase to 1.7
MMT, up by 8 percent over MY03. As indicated above, it is widely
believed that the State Reserve was nearly empty prior to the harvest
and therefore had no means to regulate the market when domestic prices
spiked. This led to increased imports.

According to well-informed sources, stocks on September 1, 2003, were
estimated at 1.57 MMT, in addition to 4.87 MMT domestic production and
estimated imports of 2 MMT as of end of August 2004, making the total
availability of 8.44 MMT. Based on a total consumption of 7 MMT plus
50,000 MT of exports, ending stock at the end of August would be 1.39
MMT, and the stocks to use ratio stood at 19.9 percent. In a
Cncotton.com survey released in March 04 by, stocks at mills remained
low \-- 36 percent of respondents reporting stocks at less than 20 days
use.

The stocks:use ratios are 25 percent, 22 percent, and 21 percent for
MY02/03, MY03/04, and MY04/05 respectively.

# Policy

*Reform of Cotton Classification System* - In early 2003 China announced
it would overhaul its cotton classification system. The proposed cotton
classification reform scheduled to be effective on January 01, 2004 as
reported in Post's 2003 annual cotton report (GAIN
Report#[CH3092](http://www.fas.usda.gov/gainfiles/200306/145885842.pdf))
is postponed. Among the changes they are considering are using the U.S.
bale size, establishing a national database to track each bale of
cotton, and revising the testing methods for its cotton classification.

Officials said this delay was because the preparation work had not yet
been completed. Trial reform, however, is to be implemented in selected
facilities comprising eight cotton-processing entities and eight
classification agencies. These facilities are mainly located in
Xinjiang, Henan, and other leading producing provinces. They are
requested to install new international standardized baling machinery and
equipped with HVI laboratories. A final list of facilities entering the
trial implementation will be announced after being checked and accepted
by State Cotton Classification Reform Leadership Group in Aug 04. Trade
contacts' opinions varied on how long it would be before the new
classification system would be fully operational. Some said it might
take as long as ten years, while one larger merchant said it could be
operating soon. The China Fiber Bureau, the key player in this reform,
expressed a strong interest in learning more about the US classification
system. They thought that it was not only the physical aspects of the
reform would take time to change, but also the management system. Post
opined more communication in this regard would facilitate a more
international accepted China's classification reform. In January 2004 a
delegation of Chinese Fiber Bureau officials visited USDA's Agricultural
Marketing Service (AMS) to exchange information on cotton classification
systems.

*Update on Neps and Short Fiber Regulation* - Also, China has delayed
enforcement of an amendment to its upland cotton standard, GB-1103-1999.
It was scheduled to enter into force on Jan 1, 2004. The amendment,
which was notified to the World Trade Organization on August 9, 2002, as
document G/TBT/N/CHN/7, proposes to limit the short fiber content in
standard grade upland cotton to less than or equal to 12 percent but not
greater than 20 percent. It also prescribes procedures for settlement of
claims for short weight and downgrading when the short fiber content is
not in accordance with the standard. The amendment also adds three
supporting technical standards: 1) GB/T 6097-1985 *Sampling Cotton
Fibers for Testing*; 2) GB/T 6098.1-1985 *Test Method for Length of
Cotton Fibers -- Roller Analysis*; and, 3) GB/T 6103-1985 *Test Method
for Flaws in Raw Cotton*. Although enforcement of the amended regulation
has been delayed until an unspecified date, it remains a source of
concern to U.S. cotton exporters because U.S. cotton is machine picked,
which tends to result in higher short fiber content and more foreign
material, whereas Chinese cotton is hand picked, which reduces the short
fiber content and foreign material.

*Production Policy* - In general, government took a flexible policy
approach toward cotton production and encouraged production based on
MOA's Regional Plan for Agriculture Products announced in February 2003.
The Plan identified three major cotton regions with the greatest growth
potential and designated them as primary cotton producing regions. They
are: 1) The Yellow River Basin: 2) the Yangtze River basin; and, 3) the
Northwest region, including Xinjiang, However, farmers' intentions to
plant cotton instead of grain worried government policy makers that
grain production would decline even further. Grain area has decline over
the past several years as farmers generated little from grain
cultivation. Therefore, the central government repeatedly stressed that
grain area should be guaranteed. Several measures, such as subsidized
seeds and reduction or elimination of the agriculture tax were
implemented to stimulate grain production. Given the limited land
availability, in the short term, cotton area is most likely to be
relatively stable in line with MOA's Regional Planning.

*Tariff Rate Quota Administration* - China's WTO commitment requires it
to provide a tariff rate quota (TRQ) on imported cotton. The committed
TRQ of 894,000 MT for CY04 was distributed a few days earlier than
usual, due to market pressure in the last months of CY03, though a total
of 500,000 MT extra TRQ was issued in September of CY03. Furthermore, in
early CY04, in an apparent attempt to alleviate the domestic cotton
shortage caused by a poor harvest and high growth of cotton consumption,
China's added 1 MMT of TRQ and distributed it all at the same time. It
is worth noting that on September 27, 2003, NDRC and the Ministry of
Commerce (MOC) issued the Interim Measures for TRQ which stipulated the
two categories A (general trade) and B (processing for export) for
cotton were removed in TRQ distribution for CY04 (unofficial translation
as GAIN Report#CH3128). This could have positive effects on imports,
although one large mill told Post this change has little impact on its
importing business, because most of its products are exported anyway.
Nevertheless, trade sources reported that, in reality, an unwritten
percentage was still marked as "processing for export" in all TRQ
distribution for CY04. As a result of the April 2004 Joint Commission on
Commerce and Trade (JCCT) bilateral discussions, NDRC agreed to comply
with its WTO commitment to release the names of TRQ recipients. TRQ
distribution details remained a "secret" because, according to NDRC, TRQ
recipients consider the exact quantities each company received as
confidential.

With regard to the TRQ after 2004, there is wide speculation within the
industry as to whether the government will keep or totally eliminate the
TRQ. Most believe the government will and should eliminate TRQ
completely. The government, however, worries that a complete removal of
TRQ will hurt China's cotton farmers. One industry media source,
however, quoted an official source who indicated, that, although the TRQ
would remain after CY04, a more flexible approach would be taken when
domestic supplies become tight. (NOTE: China's WTO commitment does
[NOT]{.underline} mandate elimination of the TRQ in Jan 2005. This is a
widely held misconception, most likely resulting from the fact that the
TRQ's for many other commodities are eliminated on that date. China's
WTO commitment requires it to provide a TRQ for 894,000 MT. This does
not increase after Jan 1, 2005. See Table 17.)

# Marketing

*Liberalization Continues* - Cotton marketing was further liberalized in
MY03 and, assuming China abides by its WTO commitments, further
liberalization and increased competition can be expected in MY04. In
general, competition among buyers became fierce in MY03. More new buyers
competed for limited cotton supplies. These factors attributed to
irrational purchasing rush in major producing provinces. CCA statistics
showed that as of the end of CY03, the number of gins reached 8,800. In
Xinjiang, ginning capacity exceeded 3.16 MMT, over doubling the yearly
production. Most of gins are of small scale with several thousand tons
in capacity. Mixed grade was popular in some gins. Some local
governments were said to have taken measures to halt approval for
establishing new gins in CY04. The traditional larger players,
especially the Cotton and Jute Corporation (CJC), continued to play an
important rule, although they may have lost market share to newly
emerged private traders. In Xinjiang, for instance, the CJC still
dominates with about 78 percent market share. Furthermore, the PCC still
maintains a *de facto* monopoly on cotton marketing activities. In other
provinces, purchasing was more diversified with relatively high market
share by non-CJC traders. Usually CJCs enjoy loan advantages from state
owned banks. According to CCA, in MY03, the Agriculture Development Bank
of China (ADBC) lent a total of RMB11.6 billion (US\$1.4 billion) to
cotton merchants, mainly CJCs. This declined by 36 percent compared to
previous year. In fact, cotton prices were far above the loan ceiling
stipulated by ADBC, so additional funds were necessary for purchasing,
making ADBC loans less attractive. Many merchants used other funds, such
as commercial loans. Farmers hoarded cotton hoping for even higher
prices and lax quality checking made the purchasing rather slow in MY03.
Competition between CJCs and other merchants has become fiercer and the
latter often enjoys the upper hand because they usually are more
efficient. It is expected that with the support of the government, some
CJCs, and even some private traders, will emerge as larger players
through restructuring and merging. Some foreign merchants have expressed
interest in entering domestic cotton marketing because they thought that
China's WTO commitment approved market access starting in 2005. Some
U.S. cotton exporters expressed concern that the proliferation of cotton
buyers is making selling cotton in China more risky because they don't
know these new buyers and they are worried about the buyers' credit
worthiness and limited experience in international transactions.

*Transportation Bottlenecks* -- Transporting cotton out of Xinjiang
remains a problem. This perennial problem is not expected to be solves
anytime soon simply because the out-going cargos are much more in-coming
goods, particularly after harvesting. Anecdotal news said the railway
sector usually fulfilled their current year task in every November, any
additional job after that will lead to high workload for next year,
therefore, from November to the end of Chinese New Year is a
bottlenecked period which co-incidents with the peak of agricultural
commodities and passengers travel. One trader estimated that nearly ten
US dollars extra cost occurred for every month delayed. In MY03, out of
the 1.6 MMT cotton, only 0.5 MMT was shipped out as of the end of
November. Most of the other 600 -700,00 MT was shipped out after late
January. The transport bottleneck exacerbated the price hike in MY03 in
terms of timely delivery of contracted quantity. One industry source,
however, indicated there has been limited improvement over the last year
or so.

*A Futures Market* -- Preparations for the establishment of a cotton
futures market in Zhengzhou Commodity Exchange continue. In a seminar
held on March 18, 2004, it was announced that most of the groundwork had
been completed and the relevant documents had been handed over to the
State Council for final approval. However, nobody could estimate when
this approval will occur. An industry source opined that the complicated
nature of the issue coupled with a pending classification reform the
reason for the slow approval. Moreover, the current spot cash market is
not well developed.

*Contract Farming* - Contract farming\" met new challenge in MY03. As
the marketing price was much higher than what was contracted, farmers
reneged on their contracts in search of better price. This was just the
opposite of what occurred before MY03 when cotton prices were weak and
the merchants often backed out of their contracts and farmers suffered
delayed purchasing, reduced prices, and delayed payment. Experts believe
the situation is MY03 was inevitable as cotton farmers lost their
confidence from past experience. Some industry insiders opined that
establishing farmers association could be part of the solution, but this
would take some time. A similar situation might occur again in MY04.

*Marketing Assistance* - U.S. cotton exporters interested in exporting
cotton to China and want marketing advice and assistance may contact
USDA/FAS's Agricultural Trade Offices (ATO) in Beijing, Shanghai, and
Guangzhou. They can be contacted via email at <ATOShanghai@usda.gov>,
<ATOBeijing@usda.gov>, and <ATOGuangzhou@usda.gov> respectively. Also,
Cotton Council International (CCI) is actively involved in promoting
U.S. cotton in China and throughout Asia. CCI serves China from its
office in Hong Kong. They can be reached via email at
<cci-hongkong@cotton.org>. Both CCI and the ATO's organize events
designed to bring U.S. cotton exporters together with Chinese buyers.

# Tables

## Production, Supply, and Demand (PSD)

### Table 1. PSD in Metric Tons

+----------------+-------+--------+--------+--------+--------+--------+
| **PSD Table**  |       |        |        |        |        |        |
+----------------+-------+--------+--------+--------+--------+--------+
| **Country**    | **C   |        |        |        |        |        |
|                | hina, |        |        |        |        |        |
|                | Pe    |        |        |        |        |        |
|                | oples |        |        |        |        |        |
|                | Rep   |        |        |        |        |        |
|                | ublic |        |        |        |        |        |
|                | of**  |        |        |        |        |        |
+----------------+-------+--------+--------+--------+--------+--------+
| **Commodity**  | **Cot |        |        |        | (H     |        |
|                | ton** |        |        |        | ECTARE |        |
|                |       |        |        |        | S)(MT) |        |
+----------------+-------+--------+--------+--------+--------+--------+
|                | 2002  | R      | 2003   | Es     | 2004   | Fo     |
|                |       | evised |        | timate |        | recast |
+----------------+-------+--------+--------+--------+--------+--------+
|                | USDA  | Post   | USDA   | Post   | USDA   | Post   |
|                | Off   | Es     | Of     | Es     | Of     | Es     |
|                | icial | timate | ficial | timate | ficial | timate |
|                | \[    | \      | \      | \      | \      | \      |
|                | Old\] | [New\] | [Old\] | [New\] | [Old\] | [New\] |
+----------------+-------+--------+--------+--------+--------+--------+
| **Market Year  |       | 0      |        | 0      |        | 0      |
| Begin**        |       | 8/2002 |        | 8/2003 |        | 8/2004 |
+----------------+-------+--------+--------+--------+--------+--------+
| Area Planted   | 0     | 4      | 0      | 5      | 0      | 5      |
|                |       | 180000 |        | 110000 |        | 750000 |
+----------------+-------+--------+--------+--------+--------+--------+
| Area Harvested | 41    | 4      | 5      | 5      | 0      | 5      |
|                | 84000 | 180000 | 100000 | 110000 |        | 750000 |
+----------------+-------+--------+--------+--------+--------+--------+
| Beginning      | 27    | 2      | 1      | 1      | 1      | 1      |
| Stocks         | 45096 | 700000 | 673011 | 642758 | 498830 | 504758 |
+----------------+-------+--------+--------+--------+--------+--------+
| Production     | 49    | 4      | 4      | 4      | 0      | 6      |
|                | 20620 | 920000 | 877075 | 870000 |        | 150000 |
+----------------+-------+--------+--------+--------+--------+--------+
| Imports        | 6     | 686758 | 1      | 1      | 0      | 1      |
|                | 80831 |        | 850676 | 830000 |        | 100000 |
+----------------+-------+--------+--------+--------+--------+--------+
| #####          | *     | **830  | **840  | **834  | **149  | **875  |
| # TOTAL SUPPLY | *8346 | 6758** | 0762** | 2758** | 8830** | 4758** |
|                | 547** |        |        |        |        |        |
+----------------+-------+--------+--------+--------+--------+--------+
| Exports        | 1     | 164000 | 43545  | 38000  | 0      | 30000  |
|                | 63513 |        |        |        |        |        |
+----------------+-------+--------+--------+--------+--------+--------+
| USE Dom.       | 65    | 6      | 6      | 6      | 0      | 7      |
| Consumption    | 10024 | 500000 | 858387 | 800000 |        | 100000 |
+----------------+-------+--------+--------+--------+--------+--------+
| Loss Dom.      | 0     | 0      | 0      | 0      | 0      | 0      |
| Consumption    |       |        |        |        |        |        |
+----------------+-------+--------+--------+--------+--------+--------+
| TOTAL Dom.     | 65    | 6      | 6      | 6      | 0      | 7      |
| Consumption    | 10024 | 500000 | 858387 | 800000 |        | 100000 |
+----------------+-------+--------+--------+--------+--------+--------+
| Ending Stocks  | 16    | 1      | 1      | 1      | 0      | 1      |
|                | 73011 | 642758 | 498830 | 504758 |        | 624758 |
+----------------+-------+--------+--------+--------+--------+--------+
| **TOTAL        | *     | **830  | **840  | **834  | **0**  | **875  |
| DISTRIBUTION** | *8346 | 6758** | 0762** | 2758** |        | 4758** |
|                | 548** |        |        |        |        |        |
+----------------+-------+--------+--------+--------+--------+--------+

### Table 2. PSD in Bales

+--------------+--------+---+--------+-------+---+---------+-------+--------+
| #####        |        |   |        |       |   |         |       |        |
| ## PSD Table |        |   |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| **Country**  | **     |   |        |       |   |         |       |        |
|              | China, |   |        |       |   |         |       |        |
|              | P      |   |        |       |   |         |       |        |
|              | eoples |   |        |       |   |         |       |        |
|              | Re     |   |        |       |   |         |       |        |
|              | public |   |        |       |   |         |       |        |
|              | of**   |   |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| *            | **Co   |   |        |       |   |         | (HEC  |        |
| *Commodity** | tton** |   |        |       |   |         | TARES |        |
|              |        |   |        |       |   |         | **)** |        |
|              |        |   |        |       |   |         |       |        |
|              |        |   |        |       |   |         | *     |        |
|              |        |   |        |       |   |         | *(480 |        |
|              |        |   |        |       |   |         | LB    |        |
|              |        |   |        |       |   |         | Bal   |        |
|              |        |   |        |       |   |         | es)** |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
|              | 2002   | R |        | 2003  |   | E       | 2004  | Fo     |
|              |        | e |        |       |   | stimate |       | recast |
|              |        | v |        |       |   |         |       |        |
|              |        | i |        |       |   |         |       |        |
|              |        | s |        |       |   |         |       |        |
|              |        | e |        |       |   |         |       |        |
|              |        | d |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
|              | USDA   | P |        | USDA  |   | Post    | USDA  | Post   |
|              | Of     | o |        | Off   |   | E       | Off   | Es     |
|              | ficial | s |        | icial |   | stimate | icial | timate |
|              | \      | t |        | \[    |   | \[New\] | \[    | \      |
|              | [Old\] | E |        | Old\] |   |         | Old\] | [New\] |
|              |        | s |        |       |   |         |       |        |
|              |        | t |        |       |   |         |       |        |
|              |        | i |        |       |   |         |       |        |
|              |        | m |        |       |   |         |       |        |
|              |        | a |        |       |   |         |       |        |
|              |        | t |        |       |   |         |       |        |
|              |        | e |        |       |   |         |       |        |
|              |        | \ |        |       |   |         |       |        |
|              |        | [ |        |       |   |         |       |        |
|              |        | N |        |       |   |         |       |        |
|              |        | e |        |       |   |         |       |        |
|              |        | w |        |       |   |         |       |        |
|              |        | \ |        |       |   |         |       |        |
|              |        | ] |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| **Market     |        | 0 |        |       |   | 08/2003 |       | 0      |
| Year Begin** |        | 8 |        |       |   |         |       | 8/2004 |
|              |        | / |        |       |   |         |       |        |
|              |        | 2 |        |       |   |         |       |        |
|              |        | 0 |        |       |   |         |       |        |
|              |        | 0 |        |       |   |         |       |        |
|              |        | 2 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| Area Planted | 0      | 4 |        | 0     |   | 5110000 | 0     | 5      |
|              |        | 1 |        |       |   |         |       | 750000 |
|              |        | 8 |        |       |   |         |       |        |
|              |        | 0 |        |       |   |         |       |        |
|              |        | 0 |        |       |   |         |       |        |
|              |        | 0 |        |       |   |         |       |        |
|              |        | 0 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| Area         | 4      | 4 |        | 51    |   | 5110000 | 0     | 5      |
| Harvested    | 184000 | 1 |        | 00000 |   |         |       | 750000 |
|              |        | 8 |        |       |   |         |       |        |
|              |        | 0 |        |       |   |         |       |        |
|              |        | 0 |        |       |   |         |       |        |
|              |        | 0 |        |       |   |         |       |        |
|              |        | 0 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| Beginning    | 12     | 1 |        | 76    |   | 7545278 | 68    | 6      |
| Stocks       | 608378 | 2 |        | 84232 |   |         | 84209 | 911437 |
|              |        | 4 |        |       |   |         |       |        |
|              |        | 0 |        |       |   |         |       |        |
|              |        | 1 |        |       |   |         |       |        |
|              |        | 2 |        |       |   |         |       |        |
|              |        | 4 |        |       |   |         |       |        |
|              |        | 9 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| Production   | 22     | 2 |        | 224   |   | 2       | 0     | 28     |
|              | 600680 | 2 |        | 00675 |   | 2368179 |       | 247290 |
|              |        | 5 |        |       |   |         |       |        |
|              |        | 9 |        |       |   |         |       |        |
|              |        | 7 |        |       |   |         |       |        |
|              |        | 8 |        |       |   |         |       |        |
|              |        | 3 |        |       |   |         |       |        |
|              |        | 2 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| Imports      | 3      | 3 |        | 85    |   | 8405291 | 0     | 5      |
|              | 127094 | 1 |        | 00257 |   |         |       | 052361 |
|              |        | 5 |        |       |   |         |       |        |
|              |        | 4 |        |       |   |         |       |        |
|              |        | 3 |        |       |   |         |       |        |
|              |        | 1 |        |       |   |         |       |        |
|              |        | 7 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| TOTAL SUPPLY | 38     | 3 |        | 385   |   | 3       | 68    | 40     |
|              | 336152 | 8 |        | 85164 |   | 8318749 | 84209 | 211088 |
|              |        | 1 |        |       |   |         |       |        |
|              |        | 5 |        |       |   |         |       |        |
|              |        | 3 |        |       |   |         |       |        |
|              |        | 3 |        |       |   |         |       |        |
|              |        | 9 |        |       |   |         |       |        |
|              |        | 9 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| Exports      | 751024 | 7 |        | 2     |   | 174536  | 0     | 137792 |
|              |        | 5 |        | 00005 |   |         |       |        |
|              |        | 3 |        |       |   |         |       |        |
|              |        | 2 |        |       |   |         |       |        |
|              |        | 6 |        |       |   |         |       |        |
|              |        | 1 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| USE Dom.     | 29     | 2 |        | 315   |   | 3       | 0     | 32     |
| Consumption  | 900900 | 9 |        | 00951 |   | 1232776 |       | 610693 |
|              |        | 8 |        |       |   |         |       |        |
|              |        | 5 |        |       |   |         |       |        |
|              |        | 4 |        |       |   |         |       |        |
|              |        | 8 |        |       |   |         |       |        |
|              |        | 5 |        |       |   |         |       |        |
|              |        | 9 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| Loss Dom.    | 0      | 0 |        | 0     |   | 0       | 0     | 0      |
| Consumption  |        |   |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| TOTAL Dom.   | 29     | 2 |        | 315   |   | 3       | 0     | 32     |
| Consumption  | 900900 | 9 |        | 00951 |   | 1232776 |       | 610693 |
|              |        | 8 |        |       |   |         |       |        |
|              |        | 5 |        |       |   |         |       |        |
|              |        | 4 |        |       |   |         |       |        |
|              |        | 8 |        |       |   |         |       |        |
|              |        | 5 |        |       |   |         |       |        |
|              |        | 9 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| Ending       | 7      | 7 |        | 68    |   | 6911437 | 0     | 7      |
| Stocks       | 684232 | 5 |        | 84209 |   |         |       | 462603 |
|              |        | 4 |        |       |   |         |       |        |
|              |        | 5 |        |       |   |         |       |        |
|              |        | 2 |        |       |   |         |       |        |
|              |        | 7 |        |       |   |         |       |        |
|              |        | 8 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+
| TOTAL        | 38     | 3 |        | 385   |   | 3       | 0     | 40     |
| DISTRIBUTION | 336157 | 8 |        | 85164 |   | 8318749 |       | 211088 |
|              |        | 1 |        |       |   |         |       |        |
|              |        | 5 |        |       |   |         |       |        |
|              |        | 3 |        |       |   |         |       |        |
|              |        | 3 |        |       |   |         |       |        |
|              |        | 9 |        |       |   |         |       |        |
|              |        | 9 |        |       |   |         |       |        |
+--------------+--------+---+--------+-------+---+---------+-------+--------+

## Trade Tables

### Table 3. China's Monthly Cotton Imports

Unit: Metric Tons

  --------------- ------------------- ------------------- ------------------- -------------------
  **Month**       **2001**            **2002**            **2003**            **2004**

  January         2,318               1,265               81,308              177,400

  February        2,868               672                 35,793              291,481

  March           5,911               50                  35,323              269,209

  April           354                 2,183               101,866             

  May             1,297               9,322               121,475             

  June            3,999               17,902              113,453             

  July            2,946               30,879              83,161              

  August          4,416               18,677              51,059              

  September       14,429              14,203              20,867              

  October         8,907               24,637              13,059              

  November        4,809               18,020              52,906              

  December        7,392               38,842              163,330             

  **TOTAL**       59,647              176,651             875,603             738,090

  **Marketing     **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**
  Year**                                                                      

  **TOTAL**       102,226             686,748                                 

  **Unit: 480-lb                                                              
  Bales**                                                                     

  **Month**       **2001**            **2002**            **2003**            

  January         10,645              5,808               373,448             814,798

  February        13,173              3,085               164,397             1,338,772

  March           27,148              229                 162,239             1,236,477

  April           1,627               10,027              467,871             

  May             5,958               42,816              557,934             

  June            18,370              82,224              521,089             

  July            13,531              141,827             381,958             

  August          20,283              85,783              234,513             

  September       66,258              65,234              95,842              

  October         40,911              113,158             59,980              

  November        22,087              82,766              242,997             

  December        33,953              178,401             750,175             

  TOTAL           273,899             811,358             4,012,443           3,390,047

  **Marketing     **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**
  Year**                                                                      

  **TOTAL**       496,422             3,154,278                               
  --------------- ------------------- ------------------- ------------------- -------------------

Source: PRC Customs Statistics

### Table 4. China's Quarterly Cotton Imports by Country of Origin 

**Marketing Year: 2001/2002 Unit: Metric Tons**

  --------------- ---------------- ---------------- ---------------- ---------------- -----------
  **Country**     **Jul-Sep/01**   **Oct-Dec/01**   **Jan-Mar/02**   **Apr-Jun/02**   **TOTAL**

  United States   9,565            13,634           616              18,641           42,456

  Australia       11,019           6,023            294              0                17,336

  Uzbekistan      0                0                0                6,844            6,844

  Egypt           925              993              1,005            869              3,793

  Benin           0                0                0                1,997            1,997

  Cote D\'lvoire  0                0                0                500              500

  Tanzania        0                270              0                0                270

  Uganda          224              0                0                0                224

  Other           58               188              70               556              872

  **TOTAL**       21,791           21,108           1,986            29,407           74,292

  **Marketing                                                                         
  Year: 2002/2003                                                                     
  Unit: Metric                                                                        
  Tons**                                                                              

  **Country**     **Jul-Sep/02**   **Oct-Dec/02**   **Jan-Mar/03**   **Apr-Jun/03**   **TOTAL**

  United States   31,138           40,682           109,213          212,456          393,489

  Uzbekistan      9,081            6,088            11,723           58,789           85,681

  Benin           12,482           2,597            10,397           15,450           40,926

  Australia       4,917            14,733           3,589            4,600            27,839

  Togo            400              4,400            1,638            8,486            14,924

  Mali            446              999              3,619            4,532            9,596

  Burkina Faso    0                620              620              8,192            9,432

  Egypt           1,679            968              3,143            2,470            8,260

  Other           3,616            10,413           8,482            21,818           44,329

  **TOTAL**       63,759           81,499           152,424          336,793          634,475

  **Marketing                                                                         
  Year: 2003/2004                                                                     
  Unit: Metric                                                                        
  Tons**                                                                              

  **Country**     **Jul-Sep/03**   **Oct-Dec/03**   **Jan-Mar/04**   **Apr-Jun/04**   **TOTAL**

  United States   71,209           11,902           455,151                           538,262

  Uzbekistan      35,807           7,167            72,779                            115,753

  Cote d\'lvoire  400              18,909           25,802                            45,111

  Austrilia       2,600            13,163           25,855                            41,618

  Benin           18,700           6,493            14,472                            39,665

  Burkina Faso    5,022            9,098            21,005                            35,125

  India           25               1,791            24,885                            26,701

  Mali            5,978            6,409            7,621                             20,008

  Other           15,347           47,246           90,520                            153,113

  **TOTAL**       155,088          122,178          738,090          0                1,015,356
  --------------- ---------------- ---------------- ---------------- ---------------- -----------

Source: PRC Customs Statistics

### Table 5. China\'s Monthly Cotton Exports

**Unit: Metric Tons**

  --------------- ------------------- ------------------- ------------------- -------------------
  **Month**       **2001**            **2002**            **2003**            **2004**

  January         7,574               1,933               13,901              1,150

  February        8,668               2,614               17,995              1,323

  March           10,014              3,299               17,786              1,151

  April           7,683               7,915               12,091              

  May             4,700               15,106              7,134               

  June            4,778               20,379              5,906               

  July            1,869               15,306              5,881               

  August          2,414               17,920              5,063               

  September       46                  17,409              1,970               

  October         1,008               12,150              9,791               

  November        835                 15,847              10,173              

  December        1,447               20,037              4,756               

  **TOTAL**       51,035              149,915             112,447             3,624

                                                                              

  **Marketing     **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**
  Year**                                                                      

  **TOTAL**       72,302              164,057                                 

  **Unit: 480-lb                                                              
  Bales**                                                                     

  **Month**       **2001**            **2002**            **2003**            **2004**

  January         34,786              8,878               63,847              5,282

  February        39,811              12,006              82,651              6,077

  March           45,993              15,152              81,691              5,287

  April           35,287              36,354              55,534              

  May             21,586              69,382              32,766              

  June            21,945              93,601              27,126              

  July            8,583               70,300              27,011              

  August          11,089              82,307              23,254              

  September       212                 79,960              9,048               

  October         4,629               55,805              44,970              

  November        3,835               72,785              46,725              

  December        6,647               92,030              21,844              

  **TOTAL**       234,403             688,560             516,467             16,646

  **Marketing     **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**
  Year**                                                                      

  **TOTAL**       332,083             753,514                                 
  --------------- ------------------- ------------------- ------------------- -------------------

Source: PRC Customs Statistics

### Table 6. China\'s Quarterly Cotton Exports by Destination 

**Marketing Year: 2001/2002 Unit: Metric Tons**

  -------------- ---------------- ---------------- ---------------- ---------------- ------------
  **Country**    **Jul-Sep/01**   **Oct-Dec/01**   **Jan-Mar/02**   **Apr-Jun/02**   **TOTAL**

  Taiwan         28               31               2,378            21,813           24,250

  South Korea    4,411            705              2,038            9,209            16,363

  Indonesia      382              903              692              4,634            6,611

  Italy          616              644              929              1,286            3,474

  Japan          1,148            109              252              576              2,084

  Pakistan       0                44               375              1,467            1,887

  Thailand       0                0                415              1,194            1,609

  Hong Kong      0                3                204              1,190            1,397

  Other          226              850              562              2,032            3,670

  **TOTAL**      6,811            3,289            7,845            43,401           61,346

  **Marketing                                                                        
  Year:                                                                              
  2002/2003                                                                          
  Unit: Metric                                                                       
  Tons**                                                                             

  **Country**    **Jul-Sep/02**   **Oct-Dec/02**   **Jan-Mar/03**   **Apr-Jun/03**   **TOTAL**

  Korea, South   10,078           10,164           9,683            9,678            39,603

  Indonesia      8,188            10,255           12,782           4,623            35,847

  Thailand       5,844            8,451            11,722           4,199            30,216

  Taiwan         15,974           9,279            2,861            1,986            30,100

  Singapore      0                0                8,585            3,713            12,297

  Pakistan       2,790            2,778            310              0                5,878

  Italy          1,682            2,604            721              44               5,050

  India          1,354            1,631            868              94               3,948

  Other          4,726            2,873            2,150            794              10,543

  **TOTAL**      50,636           48,034           49,681           25,131           173,483

  **Marketing                                                                        
  Year:                                                                              
  2003/2004                                                                          
  Unit: Metric                                                                       
  Tons**                                                                             

  **Country**    **Jul-Sep /03**  **Oct-Dec/03**   **Jan-Mar/04**   **Apr-Jun/04**   **TOTAL**

  Thailand       2,777            16,648           224                               19,650

  Indonesia      3,094            4,919            954                               8,967

  Korea, South   4,662            1,983            969                               7,613

  Japan          494              40               826                               1,361

  Taiwan         563              376              81                                1,020

  Italy          519              0                173                               692

  Singapore      406              218              0                                 624

  Vietnam        109              320              0                                 429

  Other          291              217              395                               903

  **TOTAL**      12,915           24,721           3,623                             41,259
  -------------- ---------------- ---------------- ---------------- ---------------- ------------

Source: PRC Customs Statistics

### Table 7. China's Monthly Cotton Yarn and Thread Imports 

**Unit: Metric Tons**

  ------------- ------------------- ------------------- ------------------- ------------------- ---------------
  **Month**     **2000**            **2001**            **2002**            **2003**            **2004**

  January       29,935              29,752              39,953              49,962              57,570

  February      22,809              45,629              27,254              37,295              62,846

  March         36,184              48,499              54,675              60,884              65,562

  April         38,104              49,999              58,569              64,663              

  May           39,891              46,408              60,154              63,609              

  June          40,252              46,211              56,615              49,654              

  July          39,682              44,618              51,374              46,655              

  August        41,875              43,527              46,028              49,351              

  September     38,564              44,168              50,846              58,487              

  October       36,766              38,415              53,324              64,332              

  November      41,355              41,762              48,734              64,071              

  December      40,125              40,268              49,710              78,893              

  **TOTAL**     445,542             519,257             597,236             687,857             185,978

                                                                                                

  **Marketing   **Aug/00-Jul/01**   **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   Aug/04-Jul/05
  Year**                                                                                        

  **TOTAL**     509,801             556,734             621,364                                 
  ------------- ------------------- ------------------- ------------------- ------------------- ---------------

Source: PRC Customs Statistics

### Table 8. China's Quarterly Cotton Yarn and Thread Imports by Country of Origin 

### 

**Calendar Year: 2002 Unit: Metric Tons**

  ------------- ----------- ----------- ------------ ----------- -----------
  **Country**   **Jan -     **Apr       **Jul -      **Oct -     **TOTAL**
                Mar**       -Jun**      Sep**        Dec**       

  China         35,583      65,585      53,051       53,652      207,871

  Pakistan      37,531      49,633      45,215       48,378      180,757

  India         17,216      19,580      13,721       15,051      65,568

  Hong Kong     12,411      17,017      14,402       10,878      54,708

  Indonesia     6,878       9,027       7,418        8,591       31,914

  Taiwan        3,778       4,384       4,209        4,347       16,718

  South Korea   3,493       3,951       3,505        3,605       14,554

  Thailand      1,579       2,235       2,669        2,706       9,189

  Other         3,411       3,927       4,054        4,525       15,917

  **TOTAL**     121,881     175,339     148,244      151,733     597,197

  **Calendar                                                     
  Year: 2003                                                     
  Unit: Metric                                                   
  Tons**                                                         

  **Country**   **Jan -     **Apr       **Jul -      **Oct -     **TOTAL**
                Mar**       -Jun**      Sep**        Dec**       

  China         50,128      73,350      66,778       93,512      283,768

  Pakistan      50,740      48,087      41,753       49,288      189,868

  India         13,581      14,424      8,777        17,772      54,555

  Hong Kong     11,462      13,817      12,759       13,254      51,292

  Indonesia     8,379       9,994       6,273        9,110       33,756

  Taiwan        4,233       7,517       8,511        12,287      32,548

  Korea, South  4,080       4,681       3,264        4,225       16,250

  Thailand      2,343       2,434       2,868        3,251       10,896

  Other         145,798     175,492     151,626      204,045     676,961

  **TOTAL**     148,141     177,926     154,494      207,296     687,857

  **Calendar                                                     
  Year: 2004                                                     
  Unit: Metric                                                   
  Tons**                                                         

  **Country**   **Jan -     **Apr       **Jul -      **Oct -     **TOTAL**
                Mar**       -Jun**      Sep**        Dec**       

  China         73,684                                           73,684

  Pakistan      53,643                                           53,643

  India         23,948                                           23,948

  Indonesia     8,867                                            8,867

  Taiwan        6,774                                            6,774

  Hong Kong     6,682                                            6,682

  Thailand      4,069                                            4,069

  Korea, South  3,682                                            3,682

  Other         182,295                                          182,295

  **TOTAL**     185,978                                          185,978
  ------------- ----------- ----------- ------------ ----------- -----------

Source: PRC Customs Statistics

### Table 9. China's Monthly Cotton Yarn & Thread Exports

Unit: Metric Tons

  ------------- ------------------- ------------------- ------------------- ------------------- -------------------
  **Month**     **2000**            **2001**            **2002**            **2003**            **2004**

  January       12,171              8,898               17,864              22,778              24,906

  February      10,256              17,364              15,882              22,279              32,647

  March         19,657              22,124              34,106              38,966              40,241

  April         20,496              20,526              36,191              43,278              

  May           17,475              20,291              36,431              40,906              

  June          18,830              20,617              32,693              32,011              

  July          16,155              18,468              32,486              33,424              

  August        16,916              19,016              29,240              34,522              

  September     15,765              21,216              29,765              41,239              

  October       16,198              18,345              29,228              41,267              

  November      15,258              20,377              27,329              43,512              

  December      13,563              18,866              26,682              56,561              

  **TOTAL**     192,741             226,107             347,898             452,747             99,798

                                                                                                

  **Marketing   **Aug/00-Jul/01**   **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**
  Year**                                                                                        

  **TOTAL**     205,988             303,473             375,886                                 
  ------------- ------------------- ------------------- ------------------- ------------------- -------------------

Source: PRC Customs Statistics

### Table 10. China's Quarterly Cotton Yarn and Threads Exports by Destination 

**Calendar Year: 2002** **Unit: Metric Tons**

  ---------------- ------------- ------------- ------------- ------------- -----------
  **Country**      **Jan-Mar**   **Apr-Jun**   **Jul-Sep**   **Oct-Dec**   **TOTAL**

  Hong Kong        57,383        91,620        75,111        69,000        293,114

  South Korea      2,415         4,206         4,785         3,777         15,183

  Myanmar(Burma)   2,225         1,963         2,381         2,191         8,760

  Japan            1,735         1,666         1,935         2,259         7,595

  Indonesia        650           1,264         1,417         1,572         4,903

  Bangladesh       587           693           897           429           2,606

  Macau            480           608           820           582           2,490

  Malaysia         471           491           201           278           1,441

  Other            1,907         2,804         3,944         3,151         11,806

  **TOTAL**        67,853        105,315       91,491        83,239        347,898

  **Calendar Year:                                                         
  2003 Unit:                                                               
  Metric Tons**                                                            

  **Country**      **Jan-Mar**   **Apr-Jun**   **Jul-Sep**   **Oct-Dec**   **TOTAL**

  Hong Kong        69,049        97,351        90,338        121,179       377,918

  Korea, South     3,417         4,077         3,970         7,258         18,721

  Japan            2,914         3,198         2,717         3,665         12,494

  Myanmar          1,857         1,796         2,541         2,039         8,233

  Indonesia        1,873         1,553         1,816         1,418         6,659

  Bangladesh       424           931           971           737           3,063

  Macau            492           899           837           642           2,871

  Singapore        675           869           550           370           2,465

  Other            3,323         5,520         5,446         4,031         18,320

  **TOTAL**        84,023        116,195       109,185       141,340       450,744

  **Calendar Year:                                                         
  2004 Unit:                                                               
  Metric Tons**                                                            

  **Country**      **Jan-Mar**   **Apr- Jun**  **Jul-Sep**   **Oct-Dec**   **TOTAL**

  Hong Kong        84,546                                                  84,546

  Korea, South     3,830                                                   3,830

  Japan            2,071                                                   2,071

  Myanmar          1,622                                                   1,622

  Indonesia        741                                                     741

  Vietnam          700                                                     700

  Macau            557                                                     557

  Malaysia         513                                                     513

  Other            3,215                                                   3,215

  **TOTAL**        97,794                                                  97,794
  ---------------- ------------- ------------- ------------- ------------- -----------

Source: PRC Customs Statistics

### Table 11. China's Monthly Cotton Fabric Imports 

**Unit: 1,000 Square Meters**

  ------------- ------------------- ------------------- ------------------- ------------------- -------------------
  **Month**     **2000**            **2001**            **2002**            **2003**            **2004**

  January       114,646             74,907              104,339             112,343             73,589

  February      72,997              90,716              73,270              79,579              88,617

  March         109,370             115,486             99,602              112,626             110,499

  April         119,389             116,217             121,099             116,254             

  May           107,306             112,073             111,637             114,310             

  June          114,690             107,677             113,295             102,886             

  July          111,103             102,452             117,215             103,818             

  August        106,684             92,601              107,758             92,108              

  September     107,174             107,261             109,480             110,663             

  October       116,748             100,888             110,241             115,600             

  November      115,679             113,889             124,746             120,834             

  December      124,728             117,793             125,801             141,968             

  **TOTAL**     1,320,514           1,251,959           1,318,484           1,322,989           272,705

                                                                                                

  **Marketing   **Aug/00-Jul/01**   **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**
  Year**                                                                                        

  **TOTAL**     1,290,540           1,272,889           1,319,841                               
  ------------- ------------------- ------------------- ------------------- ------------------- -------------------

Source: PRC Customs Statistics

### Table 12. China's Quarterly Cotton Fabric Imports by Country of Origin 

**Calendar Year: 2002 Unit: 1000 Square Meters**

  ------------- ------------- ------------- ------------- ------------- --------------
  **Country**   **Jan-Mar**   **Apr-Jun**   **Jul-Sep**   **Oct-Dec**   **TOTAL**

  Hong Kong     78,880        111,497       101,317       111,937       403,631

  China         66,882        96,096        97,293        107,917       368,188

  Pakistan      40,766        46,314        43,019        45,433        175,532

  Japan         35,628        34,901        31,685        35,621        137,835

  Taiwan        29,661        33,755        36,307        33,753        133,476

  South Korea   6,443         7,453         8,571         8,143         30,610

  Indonesia     2,768         2,859         4,678         6,123         16,428

  India         8,733         2,547         2,323         2,223         15,826

  Other         7,433         10,596        9,253         9,640         36,922

  **TOTAL**     277,194       346,018       334,446       360,790       1,318,448

  **Calendar                                                            
  Year: 2003                                                            
  Unit: 1000                                                            
  Square                                                                
  Meters**                                                              

  **Country**   **Jan-Mar**   **Apr-Jun**   **Jul-Sep**   **Oct-Dec**   **TOTAL**

  China         95,590        115,149       107,445       148,767       466,950

  Hong Kong     79,951        99,021        81,321        102,404       362,696

  Japan         39,890        35,277        31,228        33,231        139,627

  Pakistan      36,884        26,281        33,117        34,977        131,258

  Taiwan        25,915        30,951        24,653        30,645        112,163

  Korea, South  8,666         9,894         11,464        11,631        41,655

  Indonesia     4,897         3,700         4,824         3,432         16,853

  Macau         3,212         4,880         3,406         3,078         14,575

  Other         9,543         8,298         9,132         10,240        37,212

  **TOTAL**     304,548       333,450       306,589       378,403       1,322,989

  **Calendar                                                            
  Year: 2004                                                            
  Unit: 1000                                                            
  Square                                                                
  Meters**                                                              

  **Country**   **Jan-Mar**   **Apr-Jun**   **Jul-Sep**   **Oct-Dec**   **TOTAL**

  China         95,002                                                  95,002

  Hong Kong     70,542                                                  70,542

  Japan         37,596                                                  37,596

  Pakistan      25,766                                                  25,766

  Taiwan        19,215                                                  19,215

  Korea, South  9,070                                                   9,070

  Indonesia     3,389                                                   3,389

  Thailand      3,097                                                   3,097

  Other         9,027                                                   9,027

  **TOTAL**     272,705                                                 272,705
  ------------- ------------- ------------- ------------- ------------- --------------

Source: PRC Customs Statistics

### Table 13. China's Monthly Cotton Fabric Exports 

**Unit: 1,000 Square Meters**

  ------------- ------------------- ------------------- ------------------- ------------------- -------------------
  **Month**     **2000**            **2001**            **2002**            **2003**            **2004**

  January       213,149             162,477             243,238             340,945             266,477

  February      175,305             203,764             205,387             255,225             215,131

  March         266,985             256,991             276,775             361,889             357,430

  April         264,981             244,005             324,130             405,110             

  May           239,557             240,884             292,785             367,592             

  June          249,551             219,241             287,557             339,135             

  July          201,353             211,146             309,311             329,240             

  August        226,711             224,327             319,404             322,999             

  September     225,154             259,024             339,919             390,739             

  October       231,727             236,242             345,531             378,620             

  November      227,746             273,061             367,091             369,244             

  December      209,362             269,613             369,102             480,706             

  **TOTAL**     2,731,581           2,800,775           3,680,230           4,341,446           839,038

                                                                                                

  **Marketing   **Aug/00-Jul/01**   **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**
  Year**                                                                                        

  **TOTAL**     2,659,207           3,201,450           4,319,841                               
  ------------- ------------------- ------------------- ------------------- ------------------- -------------------

Source: PRC Customs Statistics

### Table 14. China's Quarterly Cotton Fabric Exports by Destination 

**Calendar Year: 2002 Unit: 1000 Square meters**

  --------------- ------------- ------------- ------------- ------------- -----------
  **Country**     **Jan-Mar**   **Apr-Jun**   **Jul-Sep**   **Oct-Dec**   **TOTAL**

  Hong Kong       208,071       268,254       271,443       317,268       1,065,036

  South Korea     93,604        84,771        73,488        64,237        316,100

  Japan           38,956        51,631        84,362        89,159        264,108

  Benin           28,490        45,282        49,083        67,727        190,582

  Bangladesh      31,358        52,277        42,831        59,104        185,570

  United States   33,957        48,801        44,603        33,416        160,777

  Mexico          11,483        13,861        20,532        19,566        65,442

  Sri Lanka       15,209        10,187        17,291        20,215        62,902

  Other           264,236       329,406       364,935       411,032       1,369,609

  **TOTAL**       725,365       904,470       968,568       1,081,724     3,680,127

  **Calendar                                                              
  Year: 2003                                                              
  Unit: 1000                                                              
  Square meters**                                                         

  **Country**     **Jan-Mar**   **Apr-Jun**   **Jul-Sep**   **Oct-Dec**   **TOTAL**

  Hong Kong       249,300       286,745       261,330       353,094       1,150,469

  Japan           76,262        77,897        73,081        99,674        326,914

  Korea, South    70,840        66,377        61,585        97,677        296,478

  Benin           55,778        67,773        81,822        74,130        279,503

  Bangladesh      46,661        75,484        53,189        70,291        245,626

  United States   34,038        47,456        35,200        35,820        152,515

  Nigeria         24,166        35,591        35,281        20,381        115,419

  Mexico          24,211        27,476        21,958        26,513        100,158

  Other           401,015       454,515       441,489       477,502       1,774,521

  **TOTAL**       958,059       1,111,838     1,042,979     1,228,570     4,341,446

  **Calendar                                                              
  Year: 2004                                                              
  Unit: 1000                                                              
  Square meters**                                                         

  **Country**     **Jan-Mar**   **Apr-Jun**   **Jul-Sep**   **Oct-Dec**   **TOTAL**

  Hong Kong       221,978                                                 221,978

  Korea, South    58,390                                                  58,390

  Japan           56,694                                                  56,694

  Bangladesh      47,596                                                  47,596

  Mexico          30,650                                                  30,650

  Benin           25,805                                                  25,805

  United States   23,986                                                  23,986

  Gambia          20,701                                                  20,701

  Other           353,239                                                 353,239

  **TOTAL**       839,038                                                 839,038
  --------------- ------------- ------------- ------------- ------------- -----------

Source: PRC Customs Statistics

### Table 15. Cotton Planted Area and Production by Province

  --------------- ---------- ---- ---------- ------ ---------- --------- ---------- --------- ------------
                                                                                              

  **Planted Area                                                                              
  (1,000                                                                                      
  hectares)**                                                                                 

                                                                                              

                  **2000**        **2001**          **2002**             **2003**             **2004\***

  State           4,041           4,810             4,184                5,110                5,823

  Xinjiang        1,012           1,130             944                  1,055                1,066

  Henan           779             858               773                  927                  953

  Shandong        569             720               580                  882                  1,023

  Hubei           318             347               300                  355                  433

  Anhui           308             310               244                  390                  433

  Hebei           307             419               407                  581                  583

  Jiangsu         295             384               311                  369                  403

  Hunan           146             149               119                  139                  161

  Sichuan         70              66                74                   47                   53

  Jiangxi         69                                                     80                   100

  \* Unofficial                                                                               
  government                                                                                  
  estimates                                                                                   
  published in                                                                                
  newsletters and                                                                             
  newspapers.                                                                                 
  This total                                                                                  
  planted area is                                                                             
  more than                                                                                   
  FAS/Beijing's                                                                               
  MY04 forecast                                                                               
  (5,750,000 Ha)                                                                              
  in this report.                                                                             

                                                                                              

  **Production                                                                                
  (1,000 MT)**                                                                                

                                                                                              

                  **2000**        **2001**          **2002**             **2003**             **2004**

  State           4,417           5,324             4,916                4,870                6,236\*

  Xinjiang        1,456           1,458             1,477                1600                 

  Henan           704             828               765                  370                  

  Shandong        590             781               722                  877                  

  Hubei           304             374               323                  325                  

  Anhui           274             357               337                  241                  

  Hebei           300             419               402                  522                  

  Jiangsu         314             461               363                  291                  

  Hunan           158             190               153                  163                  

  Sichuan         59              30                24                                        

  Jiangxi         68              81                67                                        

  \*Based on the                                                                              
  recent five                                                                                 
  year\'s average                                                                             
  yield                                                                                       
  --------------- ---------- ---- ---------- ------ ---------- --------- ---------- --------- ------------

Source: PRC State Statistical Bureau

### Table 16. Cotton Tariffs as of January 1, 2004

+--------------------------------+-----------+--------+-------+-------+
| **Description**                | **HS      | **In   | **Ou  | **V.  |
|                                | Code**    | Quota  | t-of- | A.    |
|                                |           | Duty** | Quota | T.**  |
|                                |           |        | M.F   |       |
|                                |           |        | .N.** |       |
+--------------------------------+-----------+--------+-------+-------+
| Cotton, not carded or combed   | 5201-0000 | 1      | 40    | 13    |
+--------------------------------+-----------+--------+-------+-------+
| Cotton, carded or combed       | 5203-0000 | 1      | 40    | 17    |
+--------------------------------+-----------+--------+-------+-------+
| Cotton sewing thread,          | 5204-1100 |        | 5     | 17    |
| containing 85% or more by      |           |        |       |       |
| weight of cotton               |           |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                |           |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
| Cotton yarn (other than sewing | 5205-1100 |        | 5     | 17    |
| thread), containing 85% or     |           |        |       |       |
| more by weight of cotton, not  |           |        |       |       |
| for retail sale                |           |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | to        |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5205-4800 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
| Cotton yarn (other than sewing | 5207-1000 |        | 6     | 17    |
| thread), containing 85% or     |           |        |       |       |
| more by weight of cotton, for  |           |        |       |       |
| retail sale                    |           |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5207-9000 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                |           |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
| Woven fabrics of cotton,       | 5208-1100 |        | 10    | 17    |
| containing 85% or more by      |           |        |       |       |
| weight of cotton, weighing not |           |        |       |       |
| more than 200 g/square meter   |           |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | to        |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 52        |        |       |       |
|                                | 08-5900\* |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
| \"                             | \*Except: |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5208-2300 |        | 12    | 17    |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5208-4900 |        | 10    | 17    |
|                                | 90        |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
| Woven fabrics of cotton,       | 5209-1100 |        | 10    | 17    |
| containing 85% or more by      |           |        |       |       |
| weight of cotton, weighing     |           |        |       |       |
| more                           |           |        |       |       |
|                                |           |        |       |       |
| than 200 g/square meter        |           |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-1200 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-1900 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-3100 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-3200 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-3900 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-4100 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-4300 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-4900 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-5100 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-5200 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-5900 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
| \"                             | 5209-2100 |        | 12    | 17    |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-2200 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
|                                | 5209-2900 |        |       |       |
+--------------------------------+-----------+--------+-------+-------+
| \"                             | 5209-4200 |        | 10    | 17    |
+--------------------------------+-----------+--------+-------+-------+

### 

Source: PRC Customs Import and Export Tariff, 2004

### Table 17. Cotton Tariff Rate Quotas

+-------------+-----------+-------------+------------+----------------+
|             |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| China\'s    |           |             |            |                |
| Cotton TRQ: |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
|             |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| Description | HS Code   | Initial     | Final      | Implementation |
|             |           | Quota       | Quota      | of Final Quota |
|             |           |             |            |                |
|             |           | and Tariff  | and Tariff |                |
|             |           | Rate        | Rate       |                |
+-------------+-----------+-------------+------------+----------------+
|             |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| Cotton      |           | 780,750 mt  | 894,000 mt | 2004           |
+-------------+-----------+-------------+------------+----------------+
|             | 5201 -    | 1%          | 1%         | 2004           |
|             | 0000      |             |            |                |
+-------------+-----------+-------------+------------+----------------+
|             | 5203 -    | 1%          | 1%         | 2004           |
|             | 0000      |             |            |                |
+-------------+-----------+-------------+------------+----------------+
|             |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
|             |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| Other terms |           |             |            |                |
| and         |           |             |            |                |
| conditions: |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
|             |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| 1\) STE     |           |             |            |                |
| share = 33% |           |             |            |                |
| (See Note)  |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| 2\) Staging |           |             |            |                |
| of TRQ for  |           |             |            |                |
| cotton:     |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| Year TRQ    |           |             |            |                |
| quantity:   |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| 2002        |           |             |            |                |
| 818,500 mt  |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| 2003        |           |             |            |                |
| 856,250 mt  |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| 2004        |           |             |            |                |
| 894,000 mt  |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
|             |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| Note:       |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
|             |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| Tariff      |           |             |            |                |
| quotas      |           |             |            |                |
| indicated   |           |             |            |                |
| in the      |           |             |            |                |
| third       |           |             |            |                |
| column are  |           |             |            |                |
| volumes for |           |             |            |                |
| calendar    |           |             |            |                |
| year 2001.  |           |             |            |                |
| Tariff      |           |             |            |                |
| quota       |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| concessions |           |             |            |                |
| will be     |           |             |            |                |
| implemented |           |             |            |                |
| according   |           |             |            |                |
| to the date |           |             |            |                |
| specified   |           |             |            |                |
| in the      |           |             |            |                |
| \"Imple     |           |             |            |                |
| mentation\" |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| column. The |           |             |            |                |
| imp         |           |             |            |                |
| lementation |           |             |            |                |
| column      |           |             |            |                |
| indicates   |           |             |            |                |
| the date    |           |             |            |                |
| (referring  |           |             |            |                |
| to 1        |           |             |            |                |
| January of  |           |             |            |                |
| the year    |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| indicated)  |           |             |            |                |
| when the    |           |             |            |                |
| final quota |           |             |            |                |
| quantity    |           |             |            |                |
| will be     |           |             |            |                |
| achieved.   |           |             |            |                |
| The tariff  |           |             |            |                |
| quota       |           |             |            |                |
| concessions |           |             |            |                |
| are         |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| subject to  |           |             |            |                |
| equal       |           |             |            |                |
| annual      |           |             |            |                |
| adjustments |           |             |            |                |
| (occurring  |           |             |            |                |
| on 1        |           |             |            |                |
| January of  |           |             |            |                |
| each year), |           |             |            |                |
| unless      |           |             |            |                |
| otherwise   |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
| specified   |           |             |            |                |
| in the      |           |             |            |                |
| \"Other     |           |             |            |                |
| terms and   |           |             |            |                |
| co          |           |             |            |                |
| nditions\". |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+
|             |           |             |            |                |
+-------------+-----------+-------------+------------+----------------+