United States 

Department 

of Agriculture 

www.ers.usda.gov 

 A Report from the Economic Research Service

Abstract

New information about the role of recycling in the textile industry and updated estimates 

of efficiency in spinning lower estimates of the volume of cotton fiber exported by 

China in the form of textiles from those of an earlier study. China’s textile industry 

not only meets domestic demand of the world’s most populous country but is also 

the world’s largest exporter. Consequently, China is the world’s largest consumer and 

importer of cotton, but information about China’s cotton consumption is incomplete. 

This analysis of China’s textile trade offers important insights into trends in China’s 

cotton use and imports. The revised textile trade estimates have implications for the 

outlook for China’s cotton consumption and imports, which this study demonstrates 

with an econometric model of China’s textile trade.

Keywords: Cotton, textiles, China, yarn, spinning, exports, efficiency.

Acknowledgments

The authors received detailed information and assistance from Carol Skelly (World 

Agricultural Outlook Board, USDA), Leslie Meyer (Economic Research Service, 

USDA), Hunter Colby (World Agricultural Outlook Board, USDA), Liu Ying (Louis 

Dreyfus Commodities), and David Clapp (Cotton Incorporated). A wide number of 

industry experts were also consulted in the United States and China, and this project 

would not have been possible without their insights and gracious cooperation. 

Thanks to Linda Hatcher (Economic Research Service, USDA) for editorial and 

production assistance.

*Stephen MacDonald is a senior economist with the Economic Research Service. Sarah Whitley is a student at the 

University of North Carolina.

Stephen MacDonald and Sarah Whitley*

Fiber Use for Textiles and 

China’s Cotton Textile Exports

CWS-08i-01

March 2009

Contents

Approved by USDA’s 

World Agricultural 

Outlook Board

Introduction . . . . . . . . . . . . . . 2

Estimating Cotton Mill-Use 

Equivalents of Textile 

Products . . . . . . . . . . . . . . . . 3

Fiber Reuse and Its Effects on 

Consumption Estimates. . . . 5

Recycling and Reuse of 

Textile Waste . . . . . . . . . . . . 7

Fiber Blends . . . . . . . . . . . . . . 8

Trends in China’s Textile 

Industry Waste . . . . . . . . . . . 9

Revised Estimates of Textile 

Trade in Cotton Mill-Use 

Equivalents . . . . . . . . . . . . . 11

Factors Affecting China’s 

Textile Trade . . . . . . . . . . . . 12

Conclusion . . . . . . . . . . . . . . 15

References . . . . . . . . . . . . . . . 17
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Cotton and other fibers are used to produce textiles. The United States is 

the largest exporter of cotton, and China is the world’s largest importer. 

China is also the world’s largest producer and consumer of cotton. However, 

data on China’s domestic cotton market are considered unreliable, and 

new sources of information are needed.1 Exports are important for China’s 

textile industry, and shifts in textile export volume affect China’s demand for 

fiber. To gain insight into the volume of cotton demanded by China’s textile 

industry, MacDonald (2007) estimated the amount of fiber consumption 

embodied in China’s textile trade. These estimates used conversion factors 

developed for the U.S. textile industry as long ago as 50 years (Lawler, 

1985). Information from China, and a review of developments in the U.S. 

textile industry, indicated that these conversion factors overstated the amount 

of cotton fiber necessary to produce the products that China exports. In this 

study, revised estimates of the amount of fiber lost during yarn production 

are used to amend estimates of the cotton content of a number of textile products. These revisions are used to update estimates of the fiber-equivalence of 

China’s textile trade. These changes replace an adjustment based on anecdotal evidence previously employed by MacDonald (2007).

Introduction

1For more background on recent 

developments in data on China’s cotton 

sector, see MacDonald (2007).
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USDA calculates the raw-fiber equivalents of U.S. textile import and export 

volumes (Meyer et al., 2007). For each textile product (at the 10-digit level 

of the Harmonized Tariff Schedule of the United States), a conversion factor 

is computed based on the amount of estimated waste or loss at each of three 

separate stages of production: spinning, weaving, and apparel construction 

(United States International Trade Commission, 2008). The conversion factor 

measures the changes from the weight of the final product to the weight of 

the fiber consumed in the course of creating that product. The conversion 

factor is then combined with information about the cotton fiber content of the 

product and with information about fiber’s share of the product’s weight to 

get an overall conversion factor.

Table 1 illustrates how the reported trade volume of one product, “Mixed 

Fabric,”2 is converted into an estimate of the kilograms of cotton fiber 

consumed to produce 1 kilogram of the final product. Several decades ago, 

USDA determined that, to produce the yarn used in these fabrics, about 10 

percent of the fiber used was lost or wasted during the spinning process. This 

loss is represented in the “Yarnwaste” factor of the formula by 0.9, assuming 

that 90 percent of the weight of the baled cotton used to make yarn is actually realized as yarn. Note that this 0.9 presumes that all of the fiber used 

to make yarn is from a newly opened bale, and the waste created from the 

spinning process is not used to make any other textile product. The estimated 

waste when making yarn into fabric (“Fabtrim”) for Mixed Fabric is about 3 

percent; this waste is documented in the Fabtrim column of table 1 as 0.97, 

meaning 97 percent of new cotton yarn input is successfully made into fabric. 

Because Mixed Fabric is fabric, the factor that captures the waste when fabric 

is used to produce apparel or another consumer product assumes there is no 

waste, which results in a “Cutloss” factor of 1 in the table.

The inverses of the Yarnwaste, Fabtrim, and Cutloss factors are calculated to 

represent the total units of each input needed to create one unit of output. For 

example, 1/0.9 = 1.111, meaning that 1.111 tons of cotton fiber are needed 

to produce 1 ton of yarn. The product of these three inverted factors is the 

volume of fiber in kilograms to create 1 kilogram of the final product’s textile 

components. The product of the inverses is then multiplied by the “Blend” 

factor, which represents the percentage of cotton content in the commodity. 

Also factored into the equation is the fiber composition of the commodity, 

accounting for buttons, zippers, and other nonfiber-based components 

Estimating Cotton Mill-Use 

Equivalents of Textile Products

2HS5112909010: woven fabrics of 

combed wool/combed fine animal hair 

mixed mainly or solely with cotton 

(United States International Trade 

Commission, 2008).

Table1

Components of cotton mill-use equivalent conversion factor for Mixed 

Fabric, using previous methodology

 Losses during Losses during 

Fiber in Share of Fiber lost in fabric product 

components cotton content spinning production construction 

(Perfib) (Blend) (Yarnwaste) (Fabtrim) (Cutloss)

Conversion factor

1 0.5 0.9 0.97 1

Source: Calculated by ERS from industry information.
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(“Perfib”). The product of these components is the conversion factor for milluse equivalents, by weight, per weight of final product exported or imported:

(1) 0.57310.5 1

1

0.97

1

0.9

1 Fabric Mixedfor factor Conversion =××××=

USDA’s system for converting U.S. textile trade data includes about 7,000 

such conversion factors. International agreements have established the sixdigit level of the harmonized tariff schedule as the level at which product 

definitions are comparable between countries. To aggregate to the 6-digit 

level, MacDonald (2007) created weighted averages of the 10-digit conversion factors by using U.S. import volumes. After aggregation, and then 

selecting only products that include some cotton in addition to other fibers, 

a set of 582 conversion factors was used to convert China’s textile trade into 

cotton mill-use equivalents, and the results were published by MacDonald 

(2007). Updates are calculated each month by USDA analysts to help track 

China’s cotton consumption.

This study examines the estimates for “Yarnwaste” used to derive these 

conversion factors. Consultation and discussion with a variety of industry 

experts in the United States and China indicated that the parameters that 

USDA has been using for “Yarnwaste” (0.86-0.9) are too low, thereby 

assuming an unrealistically high amount of waste. This study also reviews 

estimates of the cotton content of selected products, determining that USDA’s 

current estimates are too high. The next three sections describe how these 

estimates were revised and the implications of these revisions.
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Two types of spinning processes are widely used today in producing yarn: 

open-end spinning and ring spinning. Open-end spinning is a process that 

introduces twist into the yarn by rotating the end of the yarn at a break in 

the flow of fibers between the delivery system and the package that takes 

up the yarn (Hoechst Celanese, 1990). This type of spinning uses a wide 

variety of fiber lengths and creates yarns of slightly lower quality than other 

processes. Ring spinning uses a system in which the yarn is both twisted and 

wound onto the bobbin simultaneously, but more slowly than in open-ended 

spinning, due to the larger mass of the rotating material (Hoechst Celanese, 

1990). Ring spinning usually results in a much stronger and higher quality 

yarn than does open-end spinning and is divided into two types of yarn 

(carded and combed) based on the quality of input fiber. Carding is a prespinning process in which the fiber is opened, cleaned, aligned, and formed 

into a single continuous sliver or strand. Carding results in the large majority 

of the nonspinnable waste and precedes both ring and open-end spinning. 

Ring spinning involves mores steps in the transformation of the sliver, with 

fiber loss at each step and leading to more waste than open-end spinning. 

Combed yarn is produced using an additional step beyond carding, which 

extracts neps, foreign matter, and short fibers from the previously carded 

strand. This extra attention to fiber results in finer, more compact yarn than 

those already discussed, but with this extra processing, an even smaller 

proportion of the initial bale of cotton fiber is realized in the form of yarn, 

with more going to waste.

Previously, yarn production was estimated by USDA to result in 10-16 

percent waste from the initial bale of fiber. In addition to clearly nonspinnable components like leaves, bark, stems, and dirt, Clapp (2008) indicates 

that waste from each bale also includes reworkable fibers that can be sold or 

reused by the mill. Also, total waste—particularly reusable waste—varies 

with the type of spinning process. Open-end spinning tends to create about 

5-6 percent waste, whereas ring spinning can produce, on average, around 

8-10 percent, varying between carded and combed cotton (Clapp, 2008; Liu, 

2008; Martin, 2008). When taking into account the amount of fiber waste 

that can be re-used either within the initial spinning mill or by other firms 

producing textiles, the estimates decrease further. The 5- to 6-percent waste 

estimate for open-end spinning decreases to about 3 percent because leftover 

“waste” fibers from the initial bale are mixed into bales of virgin fiber to be 

reprocessed into yarn. The 8- to 10-percent waste created from ring spinning 

can be reduced to about 5 percent, given that the waste from ring-spun cotton 

is of higher quality than that from open-end and thus can be more widely 

reused.3 Ring-spun waste can not only be conjoined with other fibers to once 

again go through the same spinning process, but some can be used on its 

own to create lower quality yarns, depending on the quality and length of the 

waste fibers.

An appropriate waste estimate for China is derived based on the ratio 

between ring and open-ended spinning. An estimated 15 percent of Chinese 

yarn is produced through open-end spinning, leaving the rest to be primarily 

Fiber Reuse and Its Effects 

on Consumption Estimates

3The 8- to 10-percent initial waste 

for ring spinning is an average of the 

waste for carded and combed yarn.
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ring spun (Liu, 2008). Again using Mixed Fabric as an example, the change 

in Yarnwaste from 0.9 to a revised 0.952, to account for fiber reuse, results in 

a new 10-digit weighted cotton fiber equivalence factor of 0.541. By raising 

the estimated parameter for “Yarnwaste” in the conversion factor’s calculation, the estimated amount of fiber needed to produce the product is reduced. 

The new conversion factor of 0.541 is 5.6 percent lower than the previous 

estimate of 0.573. Most textile products have Yarnwaste estimates of 0.9, 

but a minority were previously estimated at 0.86, which would result in an 

even larger decline in the estimated conversion factor. For these products, 

revising Yarnwaste to 0.952 implies an even larger decline in the conversion 

factor. Therefore, in the absence of further adjustments, a corrected estimate 

of the mill-use equivalence of China’s textile trade would be about 6 percent 

lower than previous estimates. Because MacDonald (2007) applied an ad hoc 

adjustment factor, the actual change is less for a number of years, as will be 

discussed in the following sections.
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Recycling by the textile industry is not confined to the use of fibers from 

spinning. A steady secondary market in textile has evolved to provide raw 

material to producers of lower quality textiles and nontextile products. What 

once was deemed disposable is now considered reusable waste in the form of 

fibers, slivers, scraps, and used clothing directly bought and sold on the open 

market between textile manufacturers. This reuse of textile waste was passed 

over in the original consumption calculations.

Almost all waste from spinning, weaving, and apparel production is used in 

some way, whether being reintroduced back into the textile industry or into 

the nontextile industry for items like cotton balls and paper. Within the textile 

industry, in addition to making new yarn, recycled textile products can be 

used for wadding and blanket and pillow stuffing if the length of the fiber is 

too short for yarn production. For example, garneting is a process in which 

new fabric scraps or old textiles are ground or scraped to break the articles 

back into fibers. This process has been very useful for man-made fibers like 

polyester, but when used on cotton products, the resulting fibers tend to be 

too short for adequate yarn production, so the recovered fibers are often used 

for stuffing or can be sold to firms outside the textile industry.

Weaving does not create a large amount of waste; the resulting effects mainly 

consist of bits of yarn not used by the loom. In the weaving process, about 3 

percent waste is created, but this waste is not used outside the textile industry 

and the assumed waste figures for fabric production in the model do not 

warrant change. While this yarn is not wasted in the sense that it is discarded, 

it is waste in the sense that it does not appear as output for any textile 

product, instead ending up as batting or other nontextile product.

Compared with the amount of waste from weaving, a larger amount of waste 

is created in the process of apparel production and finishing. Computerized 

machines have improved productivity, but this process still leaves at least 10 

percent of the initial fabric on the cutting room floor (Clapp, 2008). These 

scraps of fabric are often garneted and the fibers used for batting, insulation, 

and other nontextile products (Phillips, 2008). USDA’s “Cutloss” estimates 

for cotton apparel products have a minimum of 0.86 and average 0.91, representing respective losses of 16 percent and 9 percent. After review, none of 

these estimates were determined to be in need of updating.

The textile recycling industry also uses a significant amount of postconsumer textiles. According to the Council for Textile Recycling (1997), 

about 25 percent of total post-consumer textile waste is now recycled. About 

48 percent of that textile waste is recovered as secondhand textiles, while 

20 percent is made into wiping and polishing cloths, leaving another 26 

percent to be converted back into fibers by the garneting process discussed 

previously. Although it is important to consider post-consumer recycling to 

reach an understanding of the role of recycling in the textile industry, postconsumer recycling does not affect estimates for China. China undertakes 

little trade in used clothing, and the majority of the remaining post-consumer 

recycling is used to create nontextile products.

Recycling and Reuse of Textile Waste
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A review of cotton’s share in the fiber content of traded textile products also 

resulted in a downward adjustment in the estimated cotton, mill-use equivalence of China’s textile trade. However, due to the two-way nature of trade 

in some of these products, the impact of the adjustment on net textile trade 

varies over time. A review of the 2008 Harmonized Tariff Schedule (and of 

previous years’ schedules, to account for changes over time) revealed that 

a subset of products had been assigned significant cotton fiber shares even 

though they contain no cotton. Examples include Woven Fabric of Filament 

Yarn (HS540791), Woven Fabric of Polyester Staple (HS551511), and articles of Manmade Fiber (MMF) Wadding (HS560122). In some cases, these 

products had been assigned cotton fiber shares as high as 100 percent. A 

group of 22 products related to those listed had cotton fiber shares reduced to 

0, but the impact of these changes was small. China’s imports in 2007 would 

be 1 percent lower in estimated cotton mill-use equivalents, and exports 

0.4 percent lower if all of these products had been excluded. Prior to 2000, 

however, China was a large net importer of MMF Wadding. As a result, the 

impact on net exports of these revisions is significantly different at various 

times, an issue that will be addressed below.

In addition, the study of recycling flows in the textile industry led to a 

reassessment of cotton fiber’s share of product with a larger trade impact. 

Bedding (HS940490, articles of bedding excluding mattresses, but including 

quilts and cushions) was initially assumed to be comprised of 52 percent 

cotton fiber. However, most of this product’s cotton is in the form of stuffing, 

which is primarily made from recycled textiles. Therefore, mill consumption 

of much of the cotton in these products has already been accounted for in 

the waste estimates for other products derived from new bales of raw cotton. 

Even though bedding may be largely made of cotton, all of that cotton is not 

new, and including it would be double counting. To adjust for this discrepancy, 

a new conversion factor was constructed to account for only the new cotton 

contained in the product, considerably reducing the estimated cotton composition estimates for this specific commodity. In 2007, these bedding products 

accounted for 3.6 percent of China’s exports under the previous estimates, an 

amount revised down to 0.3 percent as a result of the adjustment to remove 

double counting. In 2007, China’s imports of these products were negligible.

Fiber Blends
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With the adjustments described above, a weighted average of the conversion 

factors across all 560 6-digit product categories is 0.968, which implies that 

the appropriate current estimate for an overall “waste factor” for China’s 

textile industry is little more than 3 percent. The most recent comparable 

estimate by China’s Government was a 1994 figure of 7.1 percent from the 

National Bureau of Statistics of China (NBS). Between 1983 and 1994, the 

NBS reported a fairly constant estimate of cotton waste, ranging from 6 

percent to 8 percent. But several developments in China’s textile industry 

since 1994 suggest that the efficiency should have improved since 1994 and 

that 7 percent was therefore a reasonable estimate for waste in 1995, even 

given a current estimate of 3.3 percent.

The growing change from state-owned to private entrepreneurship among 

China’s textile mills has affected the efficiency of production. For decades 

after 1949, most textile factories in China were state-owned, working only 

to fulfill government fiat. Producers suffered no threat from rivals, nor did 

they experience the opportunity for independent expansion. It was not until 

more privately owned producers took hold of the Chinese textile industry 

that a real market system began to develop and producers had larger incentives to improve efficiency and production standards to expand sales and 

boost profit. (Brandt, 2008). The number of state-owned industrial enterprises 

decreased from 64,737 in 1998 to 24,961 in 2006, whereas privately owned 

enterprises grew from 10,667 in 1998 to 149,736 in 2006 (National Bureau of 

Statistics of China, 2007, tables 14-8 and 14-12) (fig. 1). In fact, by 2006, the 

Chinese textile industry had 15,491 private firms and 742 state-owned enterprises (National Bureau of Statistics of China, 2007, tables 14-10 and 14-6). 

Another development that likely spurred increased efficiency was the growth 

in foreign direct investment in China’s industry. This integration of foreigninvested enterprises stimulated movement to standard international practices 

and more multinational trade (Brandt, 2008, p. 575).

With growing market-based competition, efficient use of inputs has become 

more of a focus. In China, raw materials account for at least 60 percent of 

Trends in China’s Textile Industry Waste

Figure 1

Ownership of China’s industry shifts to private sector 

Number of enterprises

 Source: National Bureau of Statistics of China, various issues.

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1998 2006

State-owned Private
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production costs, so using waste and reusable fiber offers potentially significant returns (Clapp, 2008). Increasing concerns for environmental policy 

have led to more efficient practices and standards as well.

Anecdotal evidence has become available in recent years that corroborates the 

downward shift in waste. Colby and Gruere (2007) discussed estimates of 

waste in cotton yarn production in China, which have ranged from 8 percent 

to as low as 1 percent. As Colby and Gruere indicate, the standard practice 

when estimating current cotton consumption based on NBS yarn production 

statistics is to assume a waste factor closer to 3 percent than to 7 percent. 

USDA’s previous estimates of the cotton mill-use equivalents of China’s 

textile trade had included an adjustment factor to account for the difference 

between the larger waste implied by the 0.9 values in “Yarnwaste” and the 

widely accepted evidence that 3-7 percent waste was a better estimate for 

the 1995-2008 period. Removing this adjustment factor offsets some of the 

changes in estimated mill-use equivalents for textile trade that result from the 

changes in conversion factors previously detailed. The next section summarizes the changes in textile trade estimates resulting from these adjustments.
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The revised estimates for yarn waste and cotton fiber share lower the estimated volume of textile trade in mill-use equivalents by varying degrees, 

depending on the year (fig. 2). Some of this reduction is offset by removing 

the adjustment previously imposed on the estimates to mimic the smaller 

yarn waste, but this previous adjustment also varied by year because waste 

was believed to have been higher in earlier years.

Estimated textile imports are 8 percent lower in 1995 following the revision, 

but the revised estimates for 2007 are virtually the same as the previous estimates. The removal of MMF Wadding accounts for much of this variation. 

Imports of MMF Wadding accounted for 8 percent of China’s total mill-use 

equivalent imports in 1995 in the original estimates. Between 1998 and 2002, 

the share of MMF Wadding imports dropped from 7 percent to 1.5 percent, 

and by 2007, it had fallen to 0.6 percent.

Estimated textile exports are about 2 percent lower after the revisions. The 

impact of the revisions is much more stable for exports than imports, with 

a range of 1-4 percent over the entire 1995-2007 period. Net exports are 

actually higher in the revised data between 1995 and 1999, due to the large 

reduction in estimated imports. After 2000, the revised estimates average 2.6 

percent lower than the original estimates, with a range of 1-4 percent.

The implication of these estimates is that China’s net textile exports in 

marketing year 2006/07 were equivalent to 38 million bales of cotton mill 

use, which is about 700,000 bales below USDA’s previous estimate and 

equals 77 percent of USDA’s estimate for total mill use that year. Since 

1999, China’s net textile exports have been growing strongly, with fluctuations corresponding to changes in world economic growth and trade policy. 

The final section of this report reviews how China’s textile trade has changed 

since 1995 and the factors influencing it.

Revised Estimates of Textile Trade 

in Cotton Mill-Use Equivalents

Figure 2

Corrections to estimates of China’s net textile exports

Million bales, cotton mill-use equivalents

-4.5

-4

-3.5

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1995

(Previous)

1995

(Revised)

2007

(Previous)

2007 

(Revised)

Result of reduced yarn-production waste estimates

Result of fiber-share changes

 Note: Previous corrections were those used in MacDonald (2007).

 Source: MacDonald (2007), and calculated by ERS based on data from China Customs.
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To represent China’s textile trade, an annual forecasting model was 

constructed that regressed cotton prices, exchange rates, World Trade Organization (WTO) membership, and world gross domestic product (GDP) on 

China’s net textile exports between 1995 and 2006. The following model was 

estimated using ordinary least squares regression:

	 UNet exports = b0 + b1CCotton prices + b2CExchange rate (2)

+ b3CW + b4CWorld GDP + e

Independent variables:

Cotton prices—Cotlook’s A-Index was used to capture the impact of 

changing input prices on China’s textile exports (Cotlook, 2008). The 

A-index averages the five least-cost cotton varieties in circulation, offering 

an accurate estimate of the market by portraying the most competitively 

traded volumes. As input prices rise, the profits in textile production and 

the volume decline, in both China and the rest of the world. If production 

declines faster in China’s competitors than in China, then b1 > 0.

Exchange rate—Since the costs of labor and capital for China’s textile 

producers are in local currency (renminbi, or RMB), but exports are 

purchased in other countries priced in their local currencies, exchange 

rates also have an impact on China’s textile trade. This model employs 

trade-weighted, real exchange rates calculated by the International Monetary Fund (2008). These exchange rates measure the value of the RMB, 

adjusted for relative inflation by country, and average this across China’s 

trading partners, weighting by the amount of trade. The exchange rate is 

measured in units of non-Chinese currency per RMB, so increases correspond to real RMB appreciations. Since an appreciation would reduce the 

competitiveness of China’s exports, the expected sign of b2 is negative.

WTO membership—Until 2005, the Multi-Fiber Arrangement (MFA) 

permitted WTO members to apply quantitative restrictions to textile imports 

(MacDonald and Vollrath, 2005). In 1995, the Agreement on Textiles and 

Clothing (ATC) established a mechanism to gradually eliminate MFA 

quotas on WTO members between July 1, 1995, and July 1, 2005. China 

became a WTO member in December 2001, and 2002 marked its first 

year of participation in the liberalizing ATC trade regime. Labor-intensive 

manufacturing sectors of China, and textiles and apparel in particular, 

profited greatly from the reduced barriers on exports to North America 

and Western Europe (MacDonald and Vollrath, 2005). To account for this 

difference in trade policy, China’s accession to the WTO is represented in 

this model as a dummy variable. For all pre-WTO years CWTO = 0, while 

starting in 2002, following China’s accession to the WTO, CWTO = 1. 

WTO membership is expected to have increased China’s opportunity to 

export and that b3 is positive.

World GDP—The final variable used in this model is a measure of real 

world GDP obtained from the January 14, 2009, update of Global Insight’s 

World Overview. An increase in world disposable income would warrant 

Factors Affecting China’s Textile Trade
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greater demand, especially of normal goods like textiles, and the expected 

sign of b4 is positive.

This estimated model explains 98 percent of the variation in China’s net 

exports, with a root mean squared error equal to 7 percent of the average 

level of trade during 1995-2006. The parameter values all had the expected 

signs. The parameter for price effects was significantly different from zero at 

the 10-percent level, and the parameter for income effects different from zero 

at the 1-percent level (table 2).

Since time series data are often subject to autocorrelation, the above model was 

tested to see if the observations had independently distributed errors to ensure 

they were not correlated with each other. A Breusch-Godfrey LM test for firstorder autocorrelation was performed, resulting in a test statistic of 0.003 (Quantitative Micro Software, 2007). One cannot reject the null hypothesis of no 

autocorrelation with any appropriate level of significance based on this statistic.

To ensure the model is appropriately specified and that misspecification does not 

have an effect on the autocorrelation results, the model was tested for omitted 

variables with the Ramsey RESET procedure (Quantitative Micro Software, 

2007). The RESET procedure tests functions of the dependent variable to gather 

insight on whether the error term represents any omitted variables. Testing 

against the null hypothesis of no omitted variables in the model, the Ramsey 

RESET procedure produces an F-statistic of 3.62. The probability of getting this 

F-statistic, given that the null hypothesis is true, is 0.1229. Although, this probability is not very large, it is not small enough to reject the null hypothesis of no 

omitted variables with a sufficient level of significance. Based on the Ramsey 

RESET procedure, the Breusch-Godfrey LM test for autocorrelation holds on 

the basis that no overt misspecification exists within the model.

To test the forecasting accuracy of this model, predicted net exports for 2007 

and 2008 were calculated, using Global Insight’s January 2009 forecasts of 

exchange rates and world GDP (fig. 3). The error for 2007 net exports was 11 

percent, and 2008 exports are likely to have a similar error. Even though the 

forecasts are not extremely precise, the model is still appropriate enough to 

make suggestions on what factors influence China’s textile trade. In particular, the current outlook for world economic activity in 2009 suggests that 

China’s net textile exports might decline for the first time since 1996.

Although this is a forecasting model and not a model constructed to test 

the impact of individual factors in the determination of China’s net textile 

exports, note that world GDP has a very important role in determining 

China’s textile trade in this analysis.

Table 2

Estimated parameters for variables in China textile trade model

Variable Coefficient Standard error t-statistic P>t

Cotton prices 2706108 1288338 2.10 0.074

Exchange rates -1975450 2528044 -0.78 0.460

WTO 3.36e+07 3.36e+07 1.10 0.309

World GDP 43244.35 5795.749 7.46 0.000

_constant -1.11e+09 4.32e+08 -2.56 0.037

WTO = World Trade Organization. 

GDP = Gross domestic product.
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Fiber Use for Textiles and China’s Cotton Textile Exports / CWS-08i-01 

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Figure 3

China's net textile exports, 1995-2009

Million bales, cotton mill-use equivalents

 Source: ERS calculations based on data from China Customs and Global Insight.

0

5

10

15

20

25

30

35

40

1995 97 99 2001 03 05 07 09

Actual

Estimated
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Fiber Use for Textiles and China’s Cotton Textile Exports / CWS-08i-01

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The amount of fiber lost between the opening of a new bale of cotton and the 

delivery of finished cotton textile products is less than MacDonald (2007) 

previously calculated. Outdated estimates of the amount of fiber lost to textile 

production during spinning result in an overstatement of the current amount 

of cotton needed to produce China’s net textile exports by about 5 percent. 

Outdated estimates of fiber content for a number of products lead to an additional 4-percent overstatement for current usage. Using anecdotal information, published estimates by MacDonald (2007) had revised the estimates 

for much of this error, but still, estimated cotton fiber needs for China’s net 

textile exports are about 2 percent too high.

The analysis of the revised estimate of the cotton spun to produce China’s 

exports has some implications for estimates of China’s total cotton consumption. On the one hand, it establishes a minimum for the amount of cotton that 

China’s textile mills consume. On the other hand, the textile trade estimates 

from this study are consistent with a wide range of estimates of total cotton 

consumption, given the lack of information about domestic consumption in 

China. Using USDA’s estimate of total mill consumption of cotton, at 38 

million bales in 2007/08, spinning for export is estimated to account for 77 

percent of all of China’s cotton consumption. This estimate would suggest 

that China’s cotton consumption is primarily used to supply finished products 

to consumers outside of China rather than within China.

An econometric model of textile trade combined with forecasts of world 

economic activity and exchange rates suggests that China’s textile exports 

might fall in calendar year 2009. If exports account for the majority of spinning, cotton consumption and imports by China could fall in 2008/09. USDA 

is forecasting lower cotton consumption for China in 2008/09, but the forecast is based on a variety of information. Press and industry reports from 

China suggest a slowdown in cotton spinning, but slowing domestic demand 

may be the reason for the decline.

This study leaves unanswered the question of how much cotton is being 

consumed by households within China in the form of clothing and household products. If China’s textile industry is domestically oriented, then 

total mill use of cotton may be significantly higher than USDA estimates. 

MacDonald (2007) addresses estimates of China’s domestic consumption and 

finds evidence for a broad range of estimates. Therefore, although this study 

suggests that China’s textile trade in cotton mill-use equivalents is smaller 

than previously estimated, this study does not offer strong evidence that estimates of total cotton consumption should be reduced.

Many questions about cotton consumption in China are still unanswered 

at both the industrial and household levels. Furthermore, this study by no 

means resolves every question about converting data on textile trade to milluse equivalents of cotton fiber. A particularly important issue that this study 

does not address is the implication of this research for USDA’s estimates of 

consumer demand for cotton by U.S. households (Meyer et al., 2007, app. 

table 25). Although further research on how to translate trade volumes into 

textile mill activity in both the United States and China is necessary to refine 

Conclusion
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Fiber Use for Textiles and China’s Cotton Textile Exports / CWS-08i-01 

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the estimates that this study addresses, the much larger questions about 

consumer demand and industrial consumption in China are not addressed 

here. Analysis of China’s trade data can help advance that larger research 

agenda.
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Brandt, L. China’s Great Economic Transformation, 2008, NY: Cambridge 

University Press.

Clapp, D. Personal communication, Cotton Incorporated, 2008.

Colby, Hunter, and Armelle Gruere. “Estimation of Cotton Consumption 

in China (Mainland) Based on Yarn Production Statistics,” Cotton: Review 

of the World Situation 60(3):5-9, 2007, International Cotton Advisory 

Committee.

Cotlook. Cotlook Indices, 2008, accessed from Cotton Outlook, http://www.

cotlook.com/.

Council for Textile Recycling. Don’t Overlook Textiles! 1997, http://www.

textilerecycle.org/.

Global Insight. http://www.globalinsight.com/.

Hoechst Celanese. Dictionary of Fiber and Textile Technology, Charlotte, 

NC: Hoechst Celanese, 1990.

International Monetary Fund. World Economic Outlook Database, October 

2008 Edition, 2008, 

http://www.imf.org/external/pubs/ft/weo/2008/02/weodata/index.aspx.

Lawler, John, “The Methodology of USDA Textile Trade Data,” Cotton and 

Wool Situation and Outlook Report, CWS-42, pp. 20-22, April 1985, U.S. 

Department of Agriculture, Economic Research Service.

Liu, Y. Personal communication. Louis Dreyfus Commodities (Beijing), 

2008.

MacDonald, Stephen. China’s Cotton Supply and Demand: Issues and 

Impact on the World Market, CWS-071-01, November 2007, U.S. Department of Agriculture, Economic Research Service, 

http://www.ers.usda.gov/publications/CWS/2007/11Nov/CWS07I01/.

MacDonald, Stephen, and Thomas Vollrath. The Forces Shaping World 

Cotton Consumption After the Multifibre Arrangement, CWS-05c-01, April 

2005, U.S. Department of Agriculture, Economic Research Service, 

http://www.ers.usda.gov/publications/cws/apr05/cws05c01/.

Martin, J.A. Personal communication, Parkdale Mills, 2008.

Meyer, L, S. MacDonald, and R. Skinner. Cotton and Wool Situation and 

Outlook Yearbook, CWS-2007, U.S. Department of Agriculture, Economic 

Research Service, 2007, 

http://usda.mannlib.cornell.edu/usda/ers/CWS-yearbook//2000s/2007/CWSyearbook-12-10-2007.pdf.

National Bureau of Statistics of China. China Statistical Yearbook 2007, 

2007, http://www.stats.gov.cn/tjsj/ndsj/2007/indexeh.htm.

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Economic Research Service/USDA

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