17 December 1998
Nationwide cotton exchange for China?

CHINA is considering setting up a national exchange for cotton next year to allow trading in the commodity once price controls are abolished.

A venue for the exchange has not been decided and no date has been set for when cotton will be allowed to float freely.

But the Chinese have admitted they want to make the move to ease the burden on public finances.

Chinas state distribution system buys from farmers at a premium to international prices.

It has built up large stockholdings as a result and has proved to be corrupt and wasteful.

Cotton farmers are expected to be hit by the decision to abandon price controls, because prices are expected to drop.

This could reduce planting in lower yielding, lower quality areas.

The total cotton harvest exceeded 4.3m tonnes in 1997, well above annual demand of 3.5m tonnes.

  • Financial Times 17/12/98 page 38