Required Report - public distribution

**Date:** 4/25/2005

**GAIN Report Number:** CH5032

**China, Peoples Republic of**

**Cotton and Products**

**Annual**

**2005**

**Approved by:**

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

U.S. Embassy, Beijing

**Prepared by:**

Jim Butterworth & Wu Xinping

**Report Highlights:**

MY05 imports are forecast to surge to 3.3 MMT (15.1 million bales) and
production is forecast at 5.5 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 5](#consumption)

[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, 2005
27](#table-16.-cotton-tariffs-as-of-january-1-2005)

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

# Executive Summary

Imports for MY05/06 are forecast to reach a record level of 3.3 MMT.
This forecast is based on strong demand from China's burgeoning textile
industry coupled with a drop in Chinese cotton production. The gap will
be filled by imports, primarily from the United States. Production for
MY05/06 is forecast to decline to 5.5 MMT from the record production of
6.32 MMT for MY04/05 due to a 12 percent drop of planted area and lower
yields. Continued low cotton prices since the second quarter of 2004
caused this sharp drop of cotton planted area. China's expanding textile
industry is driven both by exports and increased domestic consumption.
Textile and apparel exports are expected to grow even faster than in
recent years due in part to the removal of textile quotas on January 1,
2005. Strong domestic demand for textiles and apparel, which is driven
by Chinese consumers' increased disposable incomes, also is increasing
demand for cotton. The stocks-to-use ratio remains below 20 percent.

# 

# 

# Production

Overview - China's cotton production for MY05/06 is forecast at 5.5 MMT,
down by 13 percent from the record harvest of 6.32 MMT for MY04/05. This
is in response to the sharp drop of cotton prices that began in April
2004 and that remain relatively low as of this writing. As a result,
cotton planted area is forecast to fall to 5 MHA or 12 percent less than
the 5.69 MHA for MY04/05. Also, yields for MY05/06 are unlikely to reach
those attained in MY04/05, which were the second highest yields in the
recent five years primarily due to exceptionally good weather. The
Government of China (GOC) noted the declining trend in cotton production
in late 2004 and early 2005 and has issued a statement that encouraged
farmers to maintain a stable cotton production base. However, cotton
farmers, particularly those in the Yellow River and the Yangtze River
regions, paid little heed to these GOC advisories and planted more
profitable crops, primarily grain.

Planted Area - On February 25, 2005, China's Cotton Research Institute
(CRI) released the results of its annual cotton planting intention
survey. It concluded Chinese cotton farmers intend to plant 16.9 percent
fewer hectares in MY05/06 than they did a year earlier. (See CH5020 for
a detailed discussion about this survey and a survey conducted by the
Ministry of Agriculture.) Another survey conducted in March by the State
Cotton Marketing Monitoring Network (SCMN), the results of which were
released on April 4, 2005, showed farmers intended to plant 12.17
percent less area to cotton planting than the previous year. The SCMN's
survey interviewed 4487 cotton farmers and covered 89 counties in 15
cotton-producing provinces. A comparison of the CRI and SCMN surveys is
contained in the table below:

Table 1: Comparison of survey results by CRI and SCMN (Area drop by
percentage over MY04/05)

<table>
<colgroup>
<col style="width: 8%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 8%" />
<col style="width: 6%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 6%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td colspan="4">Yellow River</td>
<td colspan="4">Yangtze River</td>
<td colspan="4">Northwest</td>
</tr>
<tr class="even">
<td>Prov</td>
<td>AVG</td>
<td>HN</td>
<td>SD</td>
<td>HeB</td>
<td>AVG</td>
<td>AH</td>
<td>JS</td>
<td>HuB</td>
<td>AVG</td>
<td>XJ PCC</td>
<td>XJ Non-PCC</td>
<td>GS</td>
</tr>
<tr class="odd">
<td>SCMN –12.17</td>
<td>-18</td>
<td>-24</td>
<td>-16</td>
<td>-11.6</td>
<td>-12</td>
<td>-16</td>
<td>-12.7</td>
<td>-6</td>
<td>-1.2</td>
<td>-2.1</td>
<td>-0.2</td>
<td>-3.5</td>
</tr>
<tr class="even">
<td><p>CRI</p>
<p>-15.9</p></td>
<td>-20</td>
<td>-29</td>
<td>-18</td>
<td>-10</td>
<td>-17</td>
<td>-21.3</td>
<td>-6.6</td>
<td>-17.6</td>
<td>-4.2</td>
<td>-4.2</td>
<td>-4.2</td>
<td>NA</td>
</tr>
</tbody>
</table>

Note: AVG-average; HN-Henan; SD-Shandong; HeB-Hebei; AH-Anhui;
JS-Jiangsu; HuB-Hubei; XJ-Xinjiang; GS- Gansu; PCC-Production &
Construction Corp

###### 

###### As the table shows, both surveys concluded there will be significant reductions in planted area in the three major cotton producing regions, with the largest reduction expected in the Yellow River Region, followed by the Yangtze River Region and the Northwest. The SCMN survey was conducted more recently than CRI's survey; therefore, Post deems it more indicative of farmers planting intentions. Various provincial-level agricultural bureaus also published survey results, which, in general, agree with the above two surveys. 

The decrease in planted area is to be expected because of the
consistently low cotton prices that have existed since the second
quarter of 2004. According to CRI's survey/report, in 2004, cotton
prices dropped by 29.6 percent, while prices for agricultural inputs
increased 26.5 percent. Increased prices for fertilizer and seeds
accounted for 10 percent of this total increase. Falling cotton prices
coupled with increased production costs caused cotton profits to plummet
by 39 percent in 2004 \-- US\$762/HA as compared to US\$1252/HA in 2003.
On April 14, 2005, the National Statistics Bureau released a similar
analysis that concluded cotton farms' profit dropped by 34 percent in
2004 over the year before.

###### 

Yields -- Post used a yield of 1100 Kg/Ha to calculate its MY05/06
production forecast. This yield is slightly above the recent five years
average yield of 1087 Kg/Ha, but below last years exceptional yield that
resulted from ideal growing conditions. MOA experts have predicted that
cotton bollworm and aphids are likely to be worse than average in 2005
and are likely to keep yields in check.

In addition to the above factors, farmer's use of inputs also will
affect yield. Farmers are likely to reduce inputs on crops that
generated little profit in the previous season. Unlike grain crops,
which received subsidies to offset higher input costs, increased cotton
production costs made cotton the least profitable crop in 2004.
Recently, in an effort to curb the rapidly rising cost of fertilizer
caused by increased crude oil prices, China's National Development and
Reform Commission (NDRC) set a ceiling price for urea. The ceiling
price, however, is higher than last year's price, so this did little to
reduce farmers' input cost below last year's costs. These increased
costs notwithstanding, many industry insiders expect that cotton prices
will increase in the coming months, thus farmers might spend more on
fertilizer and other inputs to attain higher yields.

Agronomy practices continued to improve in 2004 and are expected to
continue improving in the coming year. The practice of transplanting
seedlings and the use of plastic sheeting increased last year and are
expected to increase in the coming year too. All of these are expected
to contribute to good yields in 2005.

Another important yield booster is the planting of transgenic Bt cotton
varieties. Farmers are expected to continue planting more area to
transgenic Bt cotton varieties in 2005. Estimates of the area planted to
Bt cotton in 2004 range from 3.1 to 3.7 MHA. According to a MOA survey,
out of the 2004/05 5.69 MHA, 3.3 MHA were planted with Bt cotton,
accounting for about 60 percent, which is 8 percent higher than 2003. In
the Yellow River Region, Bt varieties accounted for 95 percent, and the
Yangtze River Region 70 percent. CRI is using transgenic technology to
breed new varieties with disease resistance and better fiber quality,
but no detailed results were available yet and no varieties have been
commercialized. In Xinjiang, industry sources reported that Bt cotton
varieties are not widely planted because bollworms are less of a problem
there than in other areas, so farmers prefer seeds of the cheaper
conventional varieties.

Bt cottonseed production is increasingly industrialized. One large seed
company has set up several production bases nationwide. The price of
domestically produced Bt seeds generally is lower than those produced by
the large multinational companies. Unapproved Bt varieties reportedly
are planted in some provinces. Also, conventional varieties mislabeled
as transgenic seeds remains a problem. In March 2005 MOA issued a
circular to halt this practice, but they have done little on the
enforcement front.

# 

# Consumption

China's cotton consumption for MY05/06 is forecast at 8.9 MMT, 8.5
percent more than the revised estimate of 8.2 MMT for MY04/05. This
increase is driven by the high growth of domestic textile consumption as
a result of consumers' greater disposable income and the high export
growth of textile products resulting from the removal of quotas since
the beginning of 2005.

China's textile industry has developed rapidly over the past decade and
most industry insiders expect it to continue growing in the first few
years of the post-quota era. According to the NSB, the growth rate of
fixed asset investment in the textile industry for 2004 slowed down as
compared to 2003's investment boom, but the net investment still stood
at US\$14.3 billion, up by 30 percent over previous year. There were
3753 textile projects, which started construction in 2004 \-- 224 more
than in 2003. The majority of the investment (77 percent) concentrated
in the east coastal provinces. Shandong ranked #1 with net investment of
US\$3.8 billion, followed by Jiangsu with US\$2.3 billion. Private
investment increased by 61 percent over 2003. The newly constructed
projects were equipped with more advanced machinery, the import value of
which reached US\$4.5 billion in 2004. Total spindles are estimated to
have exceeded 70 million as of the end of 2004.

The increased investment has paid dividends in the form of a 24 percent
increase in output and a 16 percent increase in profits over 2003. The
average output per employee industry-wide for 2004 reached US\$21,790
\-- 16 percent more than the previous year. Approximately 19 million
people are directly involved in the textile sector, and another 100
million are indirectly involved. The consolidation of small mills is
expected to continue in the post-quota era.

China's textile and apparel exports for 2004 rose by over 18 percent
over 2003. The impact of the elimination of quotas on January 1, 2005,
was readily apparent. Total exports surged 35 percent during the first
two months of 2005 over the corresponding period of 2004. (See chart 1).
The China Textile Industry Association (CTIA) forecast China's 2005
textile and apparel export growth at 20 percent. The possible safeguards
to be imposed by the United States and EU are likely to check the growth
to some extent, but according to CTIA, in the past four years the growth
of net export value to other regions (quota free) far surpassed that to
the United States and EU.

**Chart 1. China's Textile & Apparel Monthly Exports from 2003-2005**

(In million US dollars)

![](media/image2.wmf)

Although the growth in China's textile and apparel exports has been the
subject of many press reports, the underreported story is the growth of
domestic consumption of textile and apparel products. Continued
increases in disposable incomes are driving this growth. In fact, CTIA
reported that in 2004 the domestic consumption growth rate exceeded the
export growth rate export growth rate (22.79 percent vs. 21 percent) for
the sector. Based on this strong domestic growth, plus the effect of
removal of international quotas, in 2005 and 2006 China's textile
industry is expected to maintain a growth rate similar to or higher than
that attained in 2004.

According to the NSB, along with the high growth of textile and apparel
exports, yarn production from Sep 04 to Mar 05 increased by 23.3
percent, as compared to the same period of the previous marketing year.
Industry sources said 11.5 MMT is a conservative estimate for yarn
production, with cotton use at 8.2 MMT in MY04/05 (including 0.3 MMT of
non-spinnable use). Although the annual growth rate of yarn production
between 2000 and 2004 averaged 14.69 percent, some industry sources
forecast the growth rate for 2005 to drop to approximately 10 percent.
Assuming an annual growth rate of 11 percent, total yarn production is
forecast to reach 12.8 MMT in MY05/06. As such, cotton demand is likely
to reach 9 MMT in MY05/06.

###### 

######  Chart 2: China's Yarn Production from 2000-2004

(In 10 thousand metric tons)

![](media/image3.wmf)

According to NDRC, yarn production reached 11.2 MMT in 2004, up by 14
percent over 2003 when it was 9.83 MMT, which was 16 percent more than
2002. Yarn production is concentrated in the eastern coastal provinces.
Shandong overtook Jiangsu to become the largest producer in 2004, with
production of 2.63 MMT, up by 40.6 percent over 2003. Jiangsu was second
with production of 2.2 MMT for 2004. Yarn production in Xinjiang,
China's largest cotton producing province, grew by 4.3 percent during
2004. Yarn production was 239,000 MT, as compared to 1.7 MMT of cotton
produced in Xinjiang annually.

Production of man-made fiber for 2004 increased by 20.6 percent over the
previous year. Man-made fiber for the textile sector in 2004 was 4.27
MMT. Historically, the cotton price is approximately 20 percent higher
than the price of polyester fibers. Since the second half of 2004 and
into 2005, however, the price of cotton was lower than that of
polyester. Only recently has the cotton price started to increase, but
it remains below the price of polyester fiber. This situation can be
attributed to both sides of the equation -- lower cotton prices together
with higher man-made fiber prices. The latter is caused by high crude
oil prices. Unless and until the price of crude oil falls significantly,
cotton is expected to take a larger share of the fiber market.

###### Trade

Imports for MY05/06 are forecast at 3.3 MMT. This is 83 percent higher
than the estimated 1.8 MMT imports for MY04/05. This huge increase for
MY05/06 is driven by the combination of high consumption growth as a
result of China's rapidly expanding textile industry and reduced
domestic production due to 12 percent less area planted to cotton.
Imports for MY04/05 were estimated at 1.8 MMT, down from the 1.9 MMT
imports for MY03/04. As of the end of March 2005, imports stood at
665,000 MT for MY04/05, accounting for 37 percent of the estimated 1.8
MMT for the year. The lower than expected imported volume was partly due
to the large domestic crop and the resultant low cotton price. Also,
traders and mills took a "hand-to-mouth" approach to managing stocks to
avoid the losses they experienced the previous season when they
overbought at high prices. Several industry insiders have opined that
the cotton supply could be very tight in the months just before and
during the 2005 harvest. This gap will be filled by more imports.
Despite the unprecedented high forecast of 3.3 MMT imports for MY05/06,
the stocks-to-use ratio is forecast to be very low at the end of MY05/06
at about 15 percent. It should be noted, however, that several large
traders commented that orders during the first several months of 2005
have been slow, which leads them to believe that either China has more
stocks than experts think or the NSB production number for 2004 was
understated.

Origins of imports for 2004 are similar to those in 2003, with the
United States as the largest supplier (55 percent), followed by
Uzbekistan a distant second (10 percent). Although the net imports from
the United States for 2004 increased by 545,000 MT over 2003, its market
share dropped slightly to 55 percent from previous year's 58.6 percent.
Along with the larger total imports in 2004, origins of imports are more
diversified. They come from 40 countries. Australia surpassed Benin to
become the third largest supplier, with over 100,000 MT in 2004.

While China imported more long staple cotton (above SM grade) 2004 \--
accounting for 39.4 percent of the total, the overall downgrade rate
increased as well. It ranged from 7.2 for Burkina Faso imports to 17.1
for Uzbek imports, with an overall average of 16.9 percent. The U.S.
downgrade rate was 16.6 percent.

Exports dropped rapidly in 2004 \-- to an estimated 9,000 MT from
122,000 MT in 2003. They are expected to remain insignificant in 2005.

Cotton yarn and thread trade for 2004 remained about the same as in
2003. Imports and exports of cotton fabric for 2004 are similar to that
of 2003.

**Stocks**

Stocks remain very difficult to estimate. China still regards data on
cotton stocks as state secrets that are not released to the public. A
reliable industry insider said the ending stocks for MY03/04 were 1.55
MMT. Post estimates ending stocks for MY04/05 will drop to approximately
1.4 MMT. Stocks for MY05/06 are forecast to remain very low, despite
record imports. It seems unlikely that China will purchase large amounts
of cotton to increase its strategic reserves because China's State
Cotton Reserve Corp., the agency responsible for managing such reserves,
reportedly incurred huge losses last year when it purchased cotton at
the price peak and then was forced to sell it after the price had
fallen.

# 

# 

# Policy

Reform of China's cotton classification system continued in 2004. In
general, the objective of proposed reform is to integrate China's
classification regime with international standards. (For detailed
information on the reform program, see GAIN reports CH4013 and CH4039).
The trial implementation of the reform began in September 2004 in
selected facilities, including eight classifying institutes and fourteen
gins that are distributed throughout the leading cotton-producing
provinces. On December 2, 2005, NDRC, in collaboration with other
relevant departments, held a "marketing conference" for the
above-mentioned facilities with large mills to see how the new system
will really operate. The following problems surfaced in the trial
implementation. First, the participating gins found that the fiber
length as measured by HVI usually is 0.5 MM shorter than the manually
measured results, thus resulting in losses to the gins. Second, the gins
found it not very practical to group bales based on HVI results, which
contain nineteen different parameters. Third, because payment is based
on net weight in the new system, Xinjiang gins complained about weight
losses due to low moisture regain. Finally, rail transport expenses
increased due to the new large-sized bales. However, some gins said the
current numerous gins (estimated to be over ten thousand, most of which
have a very small capacity) posed the most difficult challenge to the
reform's success. Some said the most important issue is to formulate a
HVI classification standard that correlates with the old standard to
minimize disruptions and confusion during the transition period. In
general, the trial implementation proved fruitful. Under the leadership
of NDRC, CFIB is enhancing cooperation with its U.S. counterparts. The
reform is expected to move forward in 2005. Nationwide implementation,
however, is not likely anytime soon.

Enforcement of an amendment to China's upland cotton standard,
GB-1103-1999 (See GAIN CH4013 for details) was delayed until an
unspecified date. The proposed two additional indicators, namely "neps
and short fiber content," in the amendment caused considerable concern
to some U.S. exporters when they were first published. More recently,
however, most industry sources are of the opinion that these standards
are unlikely to affect trade in the foreseeable future because China
needs increasing quantities of cotton in the post-quota era. Also,
devising a reliable method to measure these two parameters would need to
be resolved before China could effectively implement the standard. Most
Western technical experts opined that that will be very difficult. It
should be noted, however, that some textile industry insiders did
complain that the high short fiber content reduced the quality of their
products.

Production policy remains unchanged. MOA encourages steady cotton
production based on its Regional Plan for Agricultural Products
announced in February 2003. MOA's ability to really affect farmers'
planting decisions, however, is limited because farmers "plant their
pocketbook;" they pay little heed to MOA's pronouncements and policy
objectives unless they are compensated. In an effort to curb the decline
of grain production, the GOC started area-based subsidies to grain crops
in 2004. This policy, in part, resulted in a higher per-unit profit for
grain crops than cotton; thus, cotton area is expected to decline in
MY2005/06. Given China's very limited arable land, if forced to choose
between subsidizing cotton and grain production, the GOC is likely to
subsidize or otherwise support grain so it can feed the people. Farmers,
especially those in the Yellow River region, are expected to adjust
their crop mix according to comparative profit per unit. In fact, the
annual swing in cotton area ranged from 11 to 22 percent over the past
five years. Therefore, the GOC has its work cut out for itself if it
expects to maintain a stable cotton production area.

The tariff rate quota for raw cotton imports remains. China's WTO
commitment does NOT mandate elimination of cotton TRQ in January 2005.
The quantity remains the same \-- 894,000 MT. The allocation policy
remains unchanged. In order to curb the skyrocketing cotton price,
starting from late 2003 through 2004, NDRC added 1.5 MMT of cotton TRQ
over and above it WTO mandated TRQ of 894,000 MT. NDRC distributed the
new allocations in two tranches \-- at the end of 2003 and in March
2004. Although NDRC does not publish the names of the enterprises that
receive TRQ, industry sources reported that 700 enterprises received TRQ
in 2004 and 400 received it thus far in 2005. NDRC expressed concern
about a possible shortage of cotton in the remaining months of 2005 and
through 2006. On April 12, 2005, *China Textile Daily* reported that, in
response to this concern, NDRC decided to add 1 MMT of TRQ over and
above the WTO mandated TRQ. It will be distributed in two tranches.
Although no specific time was given, the report confirmed that the
relevant official indicated that the first tranche will be distributed
very soon. Most mills are concerned that they might run out of cotton,
which would hurt the entire textile industry and related industries.
China's current willingness to expand the TRQ beyond its WTO commitments
should continue into the near future because the textile industry needs
the cotton and it cannot all be produced domestically.

On January 1, 2005, in an apparent effort to diffuse international
criticism about China's flood of textile exports, China imposed an
export duty on six sensitive categories of textile/apparel products. The
duty ranged from 2.5 to 3.5 U.S. cents per unit, which amounted to less
than 1 percent when calculated on an ad valorem basis. Industry sources
reported that its impact on exports was insignificant. In response to
the pressure of safeguards to be imposed on the skyrocketing exports of
some categories by the United States and EU, in mid April, 2005, CTIA
said it would considering raising the export duty on some categories.
Industry analysts said the duty could increase by US\$0.24 to 0.48 per
unit, which is likely to reduce exports.

The Agriculture Development Bank of China (ADBC) continued to provide
targeted loans with favorable terms for purchasing cotton in 2004. ADBC
had earmarked US\$3.6 billion for this program, up by 156 percent over
the year before. As of April 10, 2004, the US\$3.6 billion was
completely issued, up dramatically from the US\$1.27 billion for 2003,
in part because of expanded loan coverage (more borrowers are eligible)
and higher interest rates on conventional commercial loans.

Another policy instrument the GOC still has at its disposal to keep the
cotton price in check is "state purchasing for reserve." However,
industry sources reported that the "state purchasing" in 2004 had little
impact on the market because the set price ceiling was not attractive.
Currently, the price is set at US\$1,452/MT (effective from March 28,
2005) from the previous US\$1,391/MT.

# Marketing

Liberalization -- As of January 1, 2005, marketing of cotton within
China was opened up to international traders and investors. This is
based on China's WTO commitments, which specified that foreign traders
can import and market cotton directly in China, and can be involved in
the marketing of domestic cotton. According to industry sources, some
foreign traders already submitted applications to the relevant
departments and the approvals are being processed.

The marketing of domestic cotton continues to be difficult in China and
it shows little sign of improving in the foreseeable future. There are
approximately 12,000 gins with a total ginning capacity estimated of 30
to 40 MMT per year, which is equivalent to 5 to 7 times of domestic
production. This lack of consolidation in the industry leads to
inefficiencies and uneven cotton quality. In October 2004, NDRC and
other relevant departments issued a circular in an effort to maintain
orderly cotton marketing. The circular ordered a crack down on
enterprises that engaged in unlawful marketing practices and mandated
the elimination of all provincial-level rules and regulations that
restricted the marketing of cotton outside of the province.

In 2004 the pace of marketing of domestic cotton was delayed as a result
of the previous year's large price swing. Farmers held onto their cotton
in hopes of receiving the same high prices they had received the
previous year. Also, traders hesitated to purchase any more cotton than
they really needed because the previous season they incurred large
losses when they overbought high-priced cotton. The China Cotton
Association (CCA) estimated that, as of the end of March 2005, total
purchases reached 5.45 MMT, accounting for 86 percent of the 6.32 MMT.
In Xinjiang, as of March 20, 2005, purchasing of 2004 crop was completed
with the total quantity amounting to 1.8 MMT. The Cotton and Jute
Corporations (CJC) continued to play an important role with around 57
percent of market share based on CCA. In Xinjiang, however, industry
sources said CJC purchased almost all of the province's 1.8 MMT 2004
production.

Transporting cotton out of Xinjiang continues to be a problem that shows
little sign of improving. Xinjiang officials complained that the
shortage of railcars seriously constrained the marketing of Xinjiang
cotton during the current marketing year. As of March 20, 2005,
approximately 0.5 MMT of old crop cotton were yet to be shipped out of
Xinjiang. Based on the availability of 100 railcars per day \[46 for the
Production and Construction Corp (PCC) and 54 for non-PCC\], deliveries
of PCC cotton are not expected to finish until August and June for
non-PCC cotton. Industry insiders suggested setting up state reserve
warehouses in Xinjiang, so that transportation can be done during the
non-peak times, i.e., between May and September.

China's first cotton futures contract was launched on June 1, 2004, on
the Zhengzhou Commodity Exchange (ZCE). According to a senior ZCE
official, the cotton futures business is going smoothly and the
transaction volume has increased steadily since the launch. The price
index is increasingly playing an important role in the international
market. The ZCE and the industry, however, will have to educate China's
cotton farmers and other stakeholders about how they can use the ZCE to
manage risk.

Contract sanctity remained a concern for global cotton traders over the
past year. According to one industry source, over 50 mills/traders
defaulted on sales valued in excess of US\$100 million. According to
CCA, NDRC instructed industry leaders to formulate "China Cotton Trade
Rules" acceptable by "all parties" based on "China Textile Rules". NDRC
also urged the industry to establish a credibility system, which,
according to one industry source, includes a "black-list" to punish
traders that engage in unethical practices. Industry insiders are
actively pushing to have this system established. If implemented, it
will help restore order and credibility to China's somewhat tarnished
image among international cotton traders.

*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**      | **     |       |       |       |       |         |
|                  | China, |       |       |       |       |         |
|                  | P      |       |       |       |       |         |
|                  | eoples |       |       |       |       |         |
|                  | Re     |       |       |       |       |         |
|                  | public |       |       |       |       |         |
|                  | of**   |       |       |       |       |         |
+------------------+--------+-------+-------+-------+-------+---------+
| **Commodity**    | **Co   |       |       |       | (HEC  |         |
|                  | tton** |       |       |       | TARES |         |
|                  |        |       |       |       | )(MT) |         |
+------------------+--------+-------+-------+-------+-------+---------+
|                  | 2003   | Re    | 2004  | Est   | 2005  | F       |
|                  |        | vised |       | imate |       | orecast |
+------------------+--------+-------+-------+-------+-------+---------+
|                  | USDA   | Post  | USDA  | Post  | USDA  | Post    |
|                  | Of     | Est   | Off   | Est   | Off   | E       |
|                  | ficial | imate | icial | imate | icial | stimate |
|                  | \      | \[    | \[    | \[    | \[    | \[New\] |
|                  | [Old\] | New\] | Old\] | New\] | Old\] |         |
+------------------+--------+-------+-------+-------+-------+---------+
| ###### M         |        | 08    |       | 08    |       | 08/2005 |
| arket Year Begin |        | /2003 |       | /2004 |       |         |
+------------------+--------+-------+-------+-------+-------+---------+
| Area Planted     | 0      | 51    | 0     | 56    | 0     | 5000000 |
|                  |        | 10000 |       | 90000 |       |         |
+------------------+--------+-------+-------+-------+-------+---------+
| Area Harvested   | 5      | 51    | 56    | 56    | 0     | 5000000 |
|                  | 110000 | 10000 | 90000 | 90000 |       |         |
+------------------+--------+-------+-------+-------+-------+---------+
| Beginning Stocks | 1      | 17    | 17    | 15    | 15    | 1415758 |
|                  | 934283 | 53497 | 07629 | 04758 | 87880 |         |
+------------------+--------+-------+-------+-------+-------+---------+
| Production       | 4      | 48    | 63    | 63    | 0     | 5500000 |
|                  | 855302 | 60000 | 14070 | 20000 |       |         |
+------------------+--------+-------+-------+-------+-------+---------+
| Imports          | 1      | 19    | 17    | 18    | 0     | 3300000 |
|                  | 922961 | 29125 | 41812 | 00000 |       |         |
+------------------+--------+-------+-------+-------+-------+---------+
| MY Imp. from     | 0      | 0     | 0     | 0     | 0     | 0       |
| U.S.             |        |       |       |       |       |         |
+------------------+--------+-------+-------+-------+-------+---------+
| ###              | 8      | 85    | 97    | 96    | 15    | 1       |
| ### TOTAL SUPPLY | 712546 | 42622 | 63511 | 24758 | 87880 | 0215758 |
+------------------+--------+-------+-------+-------+-------+---------+
| Exports          | 37667  | 37864 | 10886 | 9000  | 0     | 5000    |
+------------------+--------+-------+-------+-------+-------+---------+
| USE Dom.         | 6      | 70    | 81    | 82    | 0     | 8900000 |
| Consumption      | 967250 | 00000 | 64746 | 00000 |       |         |
+------------------+--------+-------+-------+-------+-------+---------+
| Loss Dom.        | 0      | 0     | 0     | 0     | 0     | 0       |
| Consumption      |        |       |       |       |       |         |
+------------------+--------+-------+-------+-------+-------+---------+
| TOTAL Dom.       | 6      | 70    | 81    | 82    | 0     | 8900000 |
| Consumption      | 967250 | 00000 | 64746 | 00000 |       |         |
+------------------+--------+-------+-------+-------+-------+---------+
| Ending Stocks    | 1      | 15    | 15    | 14    | 0     | 1310758 |
|                  | 707629 | 04758 | 87880 | 15758 |       |         |
+------------------+--------+-------+-------+-------+-------+---------+
| **TOTAL          | 8      | 85    | 97    | 96    | 0     | 1       |
| DISTRIBUTION**   | 712546 | 42622 | 63512 | 24758 |       | 0215758 |
+------------------+--------+-------+-------+-------+-------+---------+

### Table 2. PSD in Bales

+-----------------+-------+-------+--------+--------+-------+--------+
| **PSD Table**   |       |       |        |        |       |        |
+-----------------+-------+-------+--------+--------+-------+--------+
| ######## Count  | **C   |       |        |        |       |        |
| ry {#country-1} | hina, |       |        |        |       |        |
|                 | Pe    |       |        |        |       |        |
|                 | oples |       |        |        |       |        |
|                 | Rep   |       |        |        |       |        |
|                 | ublic |       |        |        |       |        |
|                 | of**  |       |        |        |       |        |
+-----------------+-------+-------+--------+--------+-------+--------+
| **Commodity**   | **Cot |       |        |        | (     |        |
|                 | ton** |       |        |        | HECTA |        |
|                 |       |       |        |        | RES)( |        |
|                 |       |       |        |        | 480LB |        |
|                 |       |       |        |        | B     |        |
|                 |       |       |        |        | ales) |        |
+-----------------+-------+-------+--------+--------+-------+--------+
|                 | 2002  | Re    | 2003   | Es     | 2004  | Fo     |
|                 |       | vised |        | timate |       | recast |
+-----------------+-------+-------+--------+--------+-------+--------+
|                 | USDA  | Post  | USDA   | Post   | USDA  | Post   |
|                 | Off   | Est   | Of     | Es     | Off   | Es     |
|                 | icial | imate | ficial | timate | icial | timate |
|                 | \[    | \[    | \      | \      | \[    | \      |
|                 | Old\] | New\] | [Old\] | [New\] | Old\] | [New\] |
+-----------------+-------+-------+--------+--------+-------+--------+
| ###### Ma       |       | 08    |        | 0      |       | 0      |
| rket Year Begin |       | /2003 |        | 8/2004 |       | 8/2005 |
+-----------------+-------+-------+--------+--------+-------+--------+
| Area Planted    | 0     | 51    | 0      | 5      | 0     | 5      |
|                 |       | 10000 |        | 690000 |       | 000000 |
+-----------------+-------+-------+--------+--------+-------+--------+
| Area Harvested  | 51    | 51    | 5      | 5      | 0     | 5      |
|                 | 10000 | 10000 | 690000 | 690000 |       | 000000 |
+-----------------+-------+-------+--------+--------+-------+--------+
| Beginning       | 88    | 80    | 7      | 6      | 72    | 6      |
| Stocks          | 84162 | 53812 | 843140 | 911353 | 93133 | 502576 |
+-----------------+-------+-------+--------+--------+-------+--------+
| Production      | 223   | 223   | 29     | 29     | 0     | 25     |
|                 | 00402 | 21980 | 000524 | 027760 |       | 261500 |
+-----------------+-------+-------+--------+--------+-------+--------+
| Imports         | 88    | 88    | 8      | 8      | 0     | 15     |
|                 | 32160 | 60471 | 000143 | 267400 |       | 156900 |
+-----------------+-------+-------+--------+--------+-------+--------+
| MY Imp. from    | 0     | 0     | 0      | 0      | 0     | 0      |
| U.S.            |       |       |        |        |       |        |
+-----------------+-------+-------+--------+--------+-------+--------+
| ####            | 400   | 392   | 44     | 44     | 72    | 46     |
| ## TOTAL SUPPLY | 16724 | 36263 | 843806 | 206513 | 93133 | 920976 |
+-----------------+-------+-------+--------+--------+-------+--------+
| Exports         | 1     | 1     | 49999  | 41337  | 0     | 22965  |
|                 | 73005 | 73909 |        |        |       |        |
+-----------------+-------+-------+--------+--------+-------+--------+
| USE Dom.        | 320   | 321   | 37     | 37     | 0     | 40     |
| Consumption     | 00579 | 51000 | 500678 | 662600 |       | 877700 |
+-----------------+-------+-------+--------+--------+-------+--------+
| Loss Dom.       | 0     | 0     | 0      | 0      | 0     | 0      |
| Consumption     |       |       |        |        |       |        |
+-----------------+-------+-------+--------+--------+-------+--------+
| TOTAL Dom.      | 320   | 321   | 37     | 37     | 0     | 40     |
| Consumption     | 00579 | 51000 | 500678 | 662600 |       | 877700 |
+-----------------+-------+-------+--------+--------+-------+--------+
| Ending Stocks   | 78    | 69    | 7      | 6      | 0     | 6      |
|                 | 43140 | 11353 | 293133 | 502576 |       | 020311 |
+-----------------+-------+-------+--------+--------+-------+--------+
| **TOTAL         | 400   | 392   | 44     | 44     | 0     | 46     |
| DISTRIBUTION**  | 16724 | 36263 | 843811 | 206513 |       | 920976 |
+-----------------+-------+-------+--------+--------+-------+--------+

## Trade Tables

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

**Unit: Metric Tons**

  ------------- ------------------- ------------------- ------------------- ------------------- ---- ------ ------
  **Month**     **2002**            **2003**            **2004**            **2005**                        

  January       1,265               81,308              177,400             113,076                         

  February      672                 35,793              291,481             70,599                          

  March         50                  35,323              269,209             101,500                         

  April         2,183               101,866             290,953                                             

  May           9,322               121,475             227,075                                             

  June          17,902              113,453             201,312                                             

  July          30,879              83,161              170,478                                             

  August        18,677              51,059              107,566                                             

  September     14,203              20,867              58,710                                              

  October       24,637              13,059              29,148                                              

  November      18,020              52,906              22,844                                              

  December      38,842              163,330             59,975                                              

  TOTAL         176,651             875,603             1,906,153           386,675                         

  **Marketing   **Aug/02 - Jul/03** **Aug/03 - Jul/04** **Aug/04-Jul/05**   **Aug/05-Jul/06**               
  Year**                                                                                                    

  **TOTAL**     686,748             1,929,125                                                               

                                                                                                            

  Unit: 480-lb                                                                                              
  Bales                                                                                                     

  **Month**     **2002**            **2003**            **2004**            **2005**                        

  January       5,808               373,448             814,800             519,358                         

  February      3,085               164,397             1,338,773           324,263                         

  March         229                 162,239             1,236,479           466,189                         

  April         10,027              467,871             1,336,348           0                               

  May           42,816              557,934             1,042,954           0                               

  June          82,224              521,089             924,626             0                               

  July          141,827             381,958             783,005             0                               

  August        85,783              234,513             494,052             0                               

  September     65,234              95,842              269,655             0                               

  October       113,158             59,980              133,878             0                               

  November      82,766              242,997             104,925             0                               

  December      178,401             750,175             275,465             0                               

  TOTAL         811,358             4,012,443           8,754,960           1,309,809                       

  **Marketing   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**   **Aug/05-Jul/06**               
  Year**                                                                                                    

  **TOTAL**     3,154,278           8,860,474                                                               

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

Source: PRC Customs Statistics

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

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

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

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

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

  United States       71,209      119,019     455,151          419,467          1,064,845

  Uzbekistan          35,807      7,167       72,779           69,744           185,497

  Benin               18,700      6,492       14,472           37,991           77,656

  Burkina Faso        5,022       9,098       21,005           31,924           67,049

  Australia           2,600       13,163      25,855           22,008           63,626

  Mali                5,978       6,409       7,621            33,461           53,470

  Cameroon            3,467       6,855       7,771            16,176           34,269

  Brazil              320         7,588       11,141           590              19,639

  Paraguay            0           3,950       6,500            1,925            12,375

  Greece              1,148       5,476       5,163            500              12,288

  Others              10,837      44,077      110,632          85,553           251,099

  **TOTAL**           155,087     229,294     738,091          719,340          1,841,812

                                                                                

  **Marketing Year:                                                             
  2004/2005 Unit:                                                               
  Metric Tons**                                                                 

  **Country**         **Jul-Sep   **Oct-Dec   **Jan-Mar/05**   **Apr-Jun/05**   **TOTAL**
                      /04**       /04**                                         

  United States       131,556     50,361                                        181,917

  Australia           45,340      9,550                                         54,890

  Uzbekistan          49,499      4,763                                         54,262

  Paraguay            15,342      6,674                                         22,015

  Mali                17,102      5,330                                         22,432

  Burkina Faso        16,827      4,547                                         21,374

  Benin               11,984      1,332                                         13,316

  Cameroon            7,981       1,213                                         9,194

  Brazil              770         5,040                                         5,810

  Zimbabwe            2,171       3,449                                         5,620

  Other               38,181      19,710                                        57,891

  **TOTAL**           336,754     111,968                                       448,722
  ------------------- ----------- ----------- ---------------- ---------------- -----------

Source: PRC Customs Statistics

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

**Unit: Metric Tons**

  ------------- ------------------- ------------------- ------------------- -------------------
  **Month**     **2002**            **2003**            **2004**            **2005**

  January       1,933               13,901              1,150               204

  February      2,614               17,995              1,323               59

  March         3,299               17,786              1,151               

  April         7,915               12,091              399                 

  May           15,106              7,134               205                 

  June          20,379              5,906               77                  

  July          15,306              5,881               1,806               

  August        17,920              5,063               1,023               

  September     17,409              1,970               1,044               

  October       12,150              9,791               790                 

  November      15,847              10,173              172                 

  December      20,037              4,756               143                 

  **TOTAL**     149,915             112,447             9,283               263

  **Marketing   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**   **Aug/05-Jul/06**
  Year**                                                                    

  **TOTAL**     164,057             37,864                                  

                                                                            

                                                                            

  Unit: 480-lb                                                              
  Bales                                                                     

  **Month**     **2002**            **2003**            **2004**            **2005**

  January       8,878               63,847              5,281               939

  February      12,006              82,651              6,075               269

  March         15,152              81,691              5,285               

  April         36,354              55,534              1,834               

  May           69,382              32,766              940                 

  June          93,601              27,126              355                 

  July          70,300              27,011              8,295               

  August        82,307              23,254              4,700               

  September     79,960              9,048               4,796               

  October       55,805              44,970              3,627               

  November      72,785              46,725              790                 

  December      92,030              21,844              656                 

  **TOTAL**     688,560             516,467             42,636              1,208

  **Marketing   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**   **Aug/05-Jul/06**
  Year**                                                                    

  **TOTAL**     753,514             173,909                                 

                                                                            

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

Source: PRC Customs Statistics

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

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

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

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

  Thailand          2,777       16,648      224         79          19,729

  Indonesia         3,094       4,919       954         79          9,046

  Korea, South      4,662       1,983       969         41          7,654

  Japan             494         40          826         41          1,402

  Taiwan            563         376         81          115         1,135

  India             39          0           93          0           132

  Peru              0           0           124         0           124

  Other             1,286       755         351         326         2,718

  **TOTAL**         12,915      24,721      3,623       681         41,940

                                                                    

  **Marketing Year:                                                 
  2004/2005 Unit:                                                   
  Metric Tons**                                                     

  **Country**       **Jul-Sep   **Oct-Dec   **Jan-Mar   **Apr-Jun   **TOTAL**
                    /04**       /04**       /05**       /05**       

  Japan             1,674       284                                 1,958

  Indonesia         636         102                                 738

  Korea, South      709         12                                  721

  Taiwan            461         114                                 574

  Thailand          159         100                                 259

  India             0           258                                 258

  United States     0           202                                 202

  Other             234         33                                  267

  **TOTAL**         3,874       1,105                               4,978

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

Source: PRC Customs Statistics

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

**Unit: Metric Tons**

  ------------- ------------------- ------------------- ------------------- ------------------- -------------------
  **Month**     **2001**            **2002**            **2003**            **2004**            **2005**

  January       29,752              39,953              49,962              57,570              51,642

  February      45,629              27,254              37,295              62,846              33,919

  March         48,499              54,675              60,884              65,562              0

  April         49,999              58,569              64,663              61,596              0

  May           46,408              60,154              63,609              54,009              0

  June          46,211              56,615              49,654              54,389              0

  July          44,618              51,374              46,655              53,176              0

  August        43,527              46,028              49,351              50,786              0

  September     44,168              50,846              58,487              58,653              0

  October       38,415              53,324              64,332              54,461              0

  November      41,762              48,734              64,071              57,615              0

  December      40,268              49,710              78,893              56,285              0

  **TOTAL**     519,257             597,236             687,857             686,948             85,561

  **Marketing   **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**   **Aug/05-Jul/06**
  Year**                                                                                        

  **TOTAL**     556,734             621,364             724,282                                 

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

Source: PRC Customs Statistics

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

+-----------+----------+----------+-----------+----------+-----------+
| *         |          |          |           |          |           |
| *Calendar |          |          |           |          |           |
| Year:     |          |          |           |          |           |
| 2003      |          |          |           |          |           |
| Unit:     |          |          |           |          |           |
| Metric    |          |          |           |          |           |
| Tons**    |          |          |           |          |           |
+-----------+----------+----------+-----------+----------+-----------+
| **        | **Jan -  | **Apr    | **Jul -   | **Oct -  | **TOTAL** |
| Country** | 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,    | 4,080    | 4,681    | 3,264     | 4,225    | 16,250    |
| South     |          |          |           |          |           |
+-----------+----------+----------+-----------+----------+-----------+
| 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**    |          |          |           |          |           |
+-----------+----------+----------+-----------+----------+-----------+
| **        | **Jan -  | **Apr    | **Jul -   | **Oct -  | **TOTAL** |
| Country** | Mar**    | -Jun**   | Sep**     | Dec**    |           |
+-----------+----------+----------+-----------+----------+-----------+
| China     | 73,684   | 69,189   | 66,899    | 73,155   | 282,926   |
+-----------+----------+----------+-----------+----------+-----------+
| Pakistan  | 53,643   | 45,494   | 40,511    | 46,986   | 186,634   |
+-----------+----------+----------+-----------+----------+-----------+
| India     | 23,948   | 18,610   | 19,197    | 14,448   | 76,204    |
+-----------+----------+----------+-----------+----------+-----------+
| Indonesia | 8,867    | 8,672    | 7,699     | 8,666    | 33,904    |
+-----------+----------+----------+-----------+----------+-----------+
| Taiwan    | 6,774    | 7,922    | 9,062     | 7,348    | 31,106    |
+-----------+----------+----------+-----------+----------+-----------+
| Hong Kong | 6,682    | 7,962    | 7,301     | 6,022    | 27,967    |
+-----------+----------+----------+-----------+----------+-----------+
| Korea,    | 3,682    | 4,156    | 3,190     | 3,519    | 14,548    |
| South     |          |          |           |          |           |
+-----------+----------+----------+-----------+----------+-----------+
| Thailand  | 4,069    | 3,140    | 3,623     | 2,793    | 13,625    |
+-----------+----------+----------+-----------+----------+-----------+
| Other     | 4,628    | 4,849    | 5,133     | 5,424    | 20,034    |
+-----------+----------+----------+-----------+----------+-----------+
| **TOTAL** | 185,978  | 169,995  | 162,615   | 168,361  | 686,948   |
+-----------+----------+----------+-----------+----------+-----------+
|           |          |          |           |          |           |
+-----------+----------+----------+-----------+----------+-----------+
| *         |          |          |           |          |           |
| *Calendar |          |          |           |          |           |
| Year:     |          |          |           |          |           |
| 2005      |          |          |           |          |           |
| Unit:     |          |          |           |          |           |
| Metric    |          |          |           |          |           |
| Tons**    |          |          |           |          |           |
+-----------+----------+----------+-----------+----------+-----------+
| **        | **Jan -  | **Apr    | **Jul -   | **Oct -  | **TOTAL** |
| Country** | Mar**    | -Jun**   | Sep**     | Dec**    |           |
+-----------+----------+----------+-----------+----------+-----------+
|           | NA\*     |          |           |          | NA        |
+-----------+----------+----------+-----------+----------+-----------+
| **TOTAL** | NA       |          |           |          |           |
+-----------+----------+----------+-----------+----------+-----------+
|           |          |          |           |          |           |
+-----------+----------+----------+-----------+----------+-----------+
| Source:   |          |          |           |          |           |
| PRC       |          |          |           |          |           |
| Customs   |          |          |           |          |           |
| S         |          |          |           |          |           |
| tatistics |          |          |           |          |           |
|           |          |          |           |          |           |
| Note: As  |          |          |           |          |           |
| of this   |          |          |           |          |           |
| writing,  |          |          |           |          |           |
| the 1st   |          |          |           |          |           |
| quarter   |          |          |           |          |           |
| of 2005   |          |          |           |          |           |
| is not    |          |          |           |          |           |
| available |          |          |           |          |           |
+-----------+----------+----------+-----------+----------+-----------+

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

**Unit: Metric Tons**

  ------------- ------------------- ------------------- ------------------- ------------------- ------------------- -----------
  **Month**     **2001**            **2002**            **2003**            **2004**            **2005**            

  January       8,898               17,864              22,778              24,906              23,490              

  February      17,364              15,882              22,279              32,647              19,406              

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

  April         20,526              36,191              43,278              34,155                                  

  May           20,291              36,431              40,906              33,594                                  

  June          20,617              32,693              32,011              34,402                                  

  July          18,468              32,486              33,424              31,143                                  

  August        19,016              29,240              34,522              30,152                                  

  September     21,216              29,765              41,239              34,799                                  

  October       18,345              29,228              41,267              31,469                                  

  November      20,377              27,329              43,512              33,372                                  

  December      18,866              26,682              56,561              30,811                                  

  **TOTAL**     226,107             347,898             452,747             391,691             42,897              

  **Marketing   **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**   **Aug/05-Jul/06**   
  Year**                                                                                                            

  **TOTAL**     303,473             375,886             448,162                                                     

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

Source: PRC Customs Statistics

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

+---------------+----------+---------+---------+----------+----------+
| **Calendar    |          |         |         |          |          |
| Year: 2003    |          |         |         |          |          |
| Unit: Metric  |          |         |         |          |          |
| Tons**        |          |         |         |          |          |
+---------------+----------+---------+---------+----------+----------+
| **Country**   | **J      | **Ap    | **Ju    | **O      | *        |
|               | an-Mar** | r-Jun** | l-Sep** | ct-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    |
+---------------+----------+---------+---------+----------+----------+
| Macao         | 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**   | **J      | **Apr-  | **Ju    | **O      | *        |
|               | an-Mar** | Jun**   | l-Sep** | ct-Dec** | *TOTAL** |
+---------------+----------+---------+---------+----------+----------+
| Hong Kong     | 84,546   | 84,958  | 80,471  | 82,157   | 332,132  |
+---------------+----------+---------+---------+----------+----------+
| Japan         | 2,071    | 3,326   | 3,351   | 3,553    | 12,300   |
+---------------+----------+---------+---------+----------+----------+
| Korea, South  | 3,830    | 4,050   | 3,699   | 3,173    | 14,752   |
+---------------+----------+---------+---------+----------+----------+
| Myanmar       | 1,622    | 1,861   | 2,089   | 2,458    | 8,029    |
+---------------+----------+---------+---------+----------+----------+
| Bangladesh    | 269      | 738     | 378     | 493      | 1,877    |
+---------------+----------+---------+---------+----------+----------+
| Macao         | 557      | 1,171   | 1,290   | 490      | 3,507    |
+---------------+----------+---------+---------+----------+----------+
| Vietnam       | 700      | 391     | 436     | 380      | 1,906    |
+---------------+----------+---------+---------+----------+----------+
| Italy         | 311      | 277     | 172     | 308      | 1,069    |
+---------------+----------+---------+---------+----------+----------+
| Other         | 3,889    | 5,380   | 4,209   | 2,640    | 16,118   |
+---------------+----------+---------+---------+----------+----------+
| **TOTAL**     | 97,794   | 102,151 | 96,095  | 95,652   | 391,691  |
+---------------+----------+---------+---------+----------+----------+
|               |          |         |         |          |          |
+---------------+----------+---------+---------+----------+----------+
| **Calendar    |          |         |         |          |          |
| Year: 2005    |          |         |         |          |          |
| Unit: Metric  |          |         |         |          |          |
| Tons**        |          |         |         |          |          |
+---------------+----------+---------+---------+----------+----------+
| **Country**   | **J      | **Apr-  | **Ju    | **O      | *        |
|               | an-Mar** | Jun**   | l-Sep** | ct-Dec** | *TOTAL** |
+---------------+----------+---------+---------+----------+----------+
|               | NA\*     |         |         |          | NA\*     |
+---------------+----------+---------+---------+----------+----------+
|               |          |         |         |          |          |
+---------------+----------+---------+---------+----------+----------+
|               |          |         |         |          |          |
+---------------+----------+---------+---------+----------+----------+
| Source: PRC   |          |         |         |          |          |
| Customs       |          |         |         |          |          |
| Statistics    |          |         |         |          |          |
|               |          |         |         |          |          |
| Note: As of   |          |         |         |          |          |
| this writing, |          |         |         |          |          |
| data for 1st  |          |         |         |          |          |
| quarter of    |          |         |         |          |          |
| 2005 is not   |          |         |         |          |          |
| available     |          |         |         |          |          |
+---------------+----------+---------+---------+----------+----------+

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

**Unit: 1,000 Square Meters**

  ------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------
  **Month**     **2001**            **2002**            **2003**            **2004**            **2005**            

  January       74,907              104,339             112,343             73,589              90,434              

  February      90,716              73,270              79,579              88,617              69,559              

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

  April         116,217             121,099             116,254             120,592                                 

  May           112,073             111,637             114,310             112,212                                 

  June          107,677             113,295             102,886             114,908                                 

  July          102,452             117,215             103,818             111,746                                 

  August        92,601              107,758             92,108              105,428                                 

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

  October       100,888             110,241             115,600             120,197                                 

  November      113,889             124,746             120,834             143,780                                 

  December      117,793             125,801             141,968             158,767                                 

  **TOTAL**     1,251,959           1,318,484           1,322,989           1,370,445           159,993             

  **Marketing   **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**   **Aug/05-Jul/06**   
  Year**                                                                                                            

  **TOTAL**     1,272,889           1,319,841           1,313,337                                                   

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

Source: PRC Customs Statistics

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

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

+------------+----------+----------+----------+----------+------------+
| *          | **J      | **A      | **J      | **O      | **TOTAL**  |
| *Country** | an-Mar** | pr-Jun** | ul-Sep** | ct-Dec** |            |
+------------+----------+----------+----------+----------+------------+
| 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,     | 8,666    | 9,894    | 11,464   | 11,631   | 41,655     |
| South      |          |          |          |          |            |
+------------+----------+----------+----------+----------+------------+
| Indonesia  | 4,897    | 3,700    | 4,824    | 3,432    | 16,853     |
+------------+----------+----------+----------+----------+------------+
| Macao      | 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**   |          |          |          |          |            |
+------------+----------+----------+----------+----------+------------+
| *          | **J      | **A      | **J      | **O      | **TOTAL**  |
| *Country** | an-Mar** | pr-Jun** | ul-Sep** | ct-Dec** |            |
+------------+----------+----------+----------+----------+------------+
| China      | 95,002   | 119,063  | 119,127  | 154,706  | 487,898    |
+------------+----------+----------+----------+----------+------------+
| Hong Kong  | 70,542   | 103,634  | 88,662   | 128,010  | 390,848    |
+------------+----------+----------+----------+----------+------------+
| Pakistan   | 25,766   | 23,725   | 29,383   | 37,210   | 116,084    |
+------------+----------+----------+----------+----------+------------+
| Taiwan     | 19,215   | 27,615   | 25,040   | 36,698   | 108,569    |
+------------+----------+----------+----------+----------+------------+
| Japan      | 37,596   | 35,404   | 31,950   | 34,984   | 139,934    |
+------------+----------+----------+----------+----------+------------+
| Korea,     | 9,070    | 10,827   | 11,392   | 12,861   | 44,150     |
| South      |          |          |          |          |            |
+------------+----------+----------+----------+----------+------------+
| Indonesia  | 3,389    | 2,357    | 3,303    | 4,531    | 13,580     |
+------------+----------+----------+----------+----------+------------+
| India      | 2,568    | 8,120    | 5,577    | 1,272    | 17,537     |
+------------+----------+----------+----------+----------+------------+
| Other      | 9,556    | 16,967   | 12,851   | 12,471   | 51,844     |
+------------+----------+----------+----------+----------+------------+
| **TOTAL**  | 272,705  | 347,711  | 327,285  | 422,744  | 1,370,445  |
+------------+----------+----------+----------+----------+------------+
|            |          |          |          |          |            |
+------------+----------+----------+----------+----------+------------+
| **Calendar |          |          |          |          |            |
| Year: 2005 |          |          |          |          |            |
| Unit: 1000 |          |          |          |          |            |
| Square     |          |          |          |          |            |
| Meters**   |          |          |          |          |            |
+------------+----------+----------+----------+----------+------------+
| *          | **J      | **A      | **J      | **O      | **TOTAL**  |
| *Country** | an-Mar** | pr-Jun** | ul-Sep** | ct-Dec** |            |
+------------+----------+----------+----------+----------+------------+
|            | NA\*     |          |          |          |            |
+------------+----------+----------+----------+----------+------------+
| **TOTAL**  | NA       |          |          |          |            |
+------------+----------+----------+----------+----------+------------+
|            |          |          |          |          |            |
+------------+----------+----------+----------+----------+------------+
|            |          |          |          |          |            |
+------------+----------+----------+----------+----------+------------+
| Source:    |          |          |          |          |            |
| PRC        |          |          |          |          |            |
| Customs    |          |          |          |          |            |
| Statistics |          |          |          |          |            |
|            |          |          |          |          |            |
| Note: As   |          |          |          |          |            |
| of this    |          |          |          |          |            |
| writing,   |          |          |          |          |            |
| data for   |          |          |          |          |            |
| 1st        |          |          |          |          |            |
| quarter of |          |          |          |          |            |
| 2005 is    |          |          |          |          |            |
| not        |          |          |          |          |            |
| available  |          |          |          |          |            |
+------------+----------+----------+----------+----------+------------+

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

**Unit: 1,000 Square Meters**

  ------------- ------------------- ------------------- ------------------- ------------------- -------------------
  **Month**     **2001**            **2002**            **2003**            **2004**            **2005**

  January       162,477             243,238             340,945             266,477             367,102

  February      203,764             205,387             255,225             215,131             284,965

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

  April         244,005             324,130             405,110             362,893             

  May           240,884             292,785             367,592             335,913             

  June          219,241             287,557             339,135             351,726             

  July          211,146             309,311             329,240             332,007             

  August        224,327             319,404             322,999             347,696             

  September     259,024             339,919             390,739             399,186             

  October       236,242             345,531             378,620             396,667             

  November      273,061             367,091             369,244             443,212             

  December      269,613             369,102             480,706             465,363             

  **TOTAL**     2,800,775           3,680,230           4,341,446           4,273,700           652,067

  **Marketing   **Aug/01-Jul/02**   **Aug/02-Jul/03**   **Aug/03-Jul/04**   **Aug/04-Jul/05**   **Aug/05-Jul/06**
  Year**                                                                                        

  **TOTAL**     3,201,450           4,319,841           4,163,885                               

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

Source: PRC Customs Statistics

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

**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       275,829       271,373       366,697       1,135,876

  Japan           56,694        67,386        67,694        82,546        274,320

  Korea, South    58,390        69,760        69,594        75,868        273,611

  Bangladesh      47,596        69,159        59,267        77,051        253,073

  Benin           25,805        42,546        68,751        87,941        225,043

  United States   23,986        44,474        42,072        30,920        141,453

  Mexico          30,650        33,523        25,498        39,741        129,412

  Togo            14,730        21,748        33,126        39,438        109,042

  Other           359,210       426,107       441,514       505,039       1,731,869

  **TOTAL**       839,038       1,050,531     1,078,889     1,305,241     4,273,700

                                                                          

  **Calendar                                                              
  Year: 2005                                                              
  Unit: 1000                                                              
  Square Meters**                                                         

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

                  NA\*                                                    

  **TOTAL\***     NA                                                      

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

Source: PRC Customs Statistics

Note: As of this writing, data for the 1^st^ quarter of 2005 is not
available

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

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

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

                       **2001**   **2002**   **2003**   **2004**    **2005\***

  State                4,810      4,184      5,110      5,690       5,000

  Xinjiang             1,130      944        1,055      1,137       1100

  Shandong             720        580        882        1,060       884

  Henan                858        773        927        952         722

  Hebei                419        407        581        669         591

  Anhui                310        244        390        433         350

  Jiangsu              384        311        369        409         357

  Hubei                347        300        355        372         350

  Hunan                149        119        139        142         135

  Jiangxi                                    80         100         NA

  Sichuan              66         74         47         53          NA

  \* The planted area                                               
  is Post\'s estimate                                               
  based on all                                                      
  sources. Total                                                    
  planted area for                                                  
  2004 is based on                                                  
  NSB\'s statistics;                                                
  however, planted                                                  
  area for individual                                               
  provinces is based                                                
  on reports by                                                     
  industry source.                                                  
  Detailed NSB report                                               
  will be available in                                              
  June or July.                                                     

                                                                    

  **Production (1,000                                               
  MT)**                                                             

                       **2001**   **2002**   **2003**   **2004**    **2005\***

  State                5,324      4,916      4,860      6,320       5500

  Xinjiang             1,458      1,477      1600       1780        

  Shandong             781        722        877        1098        

  Henan                828        765        377        667         

  Hebei                419        402        522        665         

  Jiangsu              461        363        291        503         

  Anhui                357        337        241        412         

  Hubei                374        323        325        395         

  Hunan                190        153        163        206         

  Sichuan              30         24         25         33          

  Jiangxi              81         67         76         NA          

  \*Based on the                                                    
  recent five year\'s                                               
  average yield; Total                                              
  production for 2004                                               
  is based on NSB\'s                                                
  statistics, however,                                              
  production for                                                    
  individual provinces                                              
  is based on reports                                               
  by industry source.                                               
  Detailed NSB report                                               
  will be available in                                              
  June or July.                                                     

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

Source: PRC State Statistical Bureau

### Table 16. Cotton Tariffs as of January 1, 2005

  ------------------------------------ ------------- -------- ---------------- -------
  **Description**                      **HS Code**   **In     **Out-of-Qouta   **V. A.
                                                     Quota    M.F.N.**         T.**
                                                     Duty**                    

  Cotton, not carded or combed         5201-0000     1        40               13

  Cotton, carded or combed             5203-0000     1        40               17

  Cotton sewing thread, containing     5204-1100              5                17

  85% or more by weight of cotton                                              

  Cotton yarn (other than sewing       5205-1100              5                17

  thread), containing 85% or more      to                                      

  by weight of cotton, not for retail  5205-4800                               
  sale                                                                         

  Cotton yarn (other than sewing       5207-1000              6                17

  thread), containing 85% or more      5207-9000                               

  by weight of cotton, for retail sale                                         

  Woven fabrics of cotton,             5208-1100              10               17

  containing 85% or more by weight of  to                                      
  cotton, weighing not more than 200                                           
  g/square meter                                                               

                                       5208-5900\*                             

                                       \*Except:                               

  \"                                   5208-2300              12               17

  Woven fabrics of cotton, containing  5209-1100              10               17
  85% or more by                                                               

  weight of cotton, weighing more      5209-1200                               

  than 200 g/square meter              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 Quota | I             |
|             |           | Quota       |             | mplementation |
|             |           |             | and Tariff  | of Final      |
|             |           | and Tariff  | Rate        | Quota         |
|             |           | 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  |           |             |             |               |
| (China      |           |             |             |               |
| added 1.5   |           |             |             |               |
| MMT TRQ for |           |             |             |               |
| 2004 to     |           |             |             |               |
| meet the    |           |             |             |               |
| demands)    |           |             |             |               |
+-------------+-----------+-------------+-------------+---------------+
| 2005        |           |             |             |               |
| 894,000 mt  |           |             |             |               |
| (China      |           |             |             |               |
| maintained  |           |             |             |               |
| an          |           |             |             |               |
| identical   |           |             |             |               |
| cotton TRQ  |           |             |             |               |
| for 2005 as |           |             |             |               |
| 2004)       |           |             |             |               |
+-------------+-----------+-------------+-------------+---------------+
| 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\". |           |             |             |               |
+-------------+-----------+-------------+-------------+---------------+
|             |           |             |             |               |
+-------------+-----------+-------------+-------------+---------------+