After a recent slump over the few months, Chinese cotton prices have now reached a "stable and reasonable" level, which reflects the interaction of supply and demand and benefits both cotton growers and users.

And this good momentum will continue at least until the end of the year, Gao Fang, secretary-general of the China Cotton Association (CCA), said.

"The price has become stable and stood at 13,500-13,900 yuan (US$1,630-1,680) a ton in late July, a reasonable level that reflects the interaction of supply and demand," she said.

This is in stark contrast to 17,700 yuan (US$2,140) in February, when it reached a peak.

The domestic cotton price has been falling since March due to a combination of factors such as government control of excessive lending to the textile industry, imports of international cotton and expectations of a good harvest in August, Gao said.

"The current price will be acceptable to both cotton growers and users," she said.

Gao's association was established in September, and was expected to represent the interests of all cotton-related industries and people such as cotton growers, distributors and consumers.

An unnamed official from the China Cotton Textile Association confirmed that textile producers felt "comfortable" about the current price.

At this price, cotton growers would also make profit, Gao said.

Gao also revealed that the central government would adopt macrocontrol measures to stabilize prices and stop them from fluctuating dramatically.

It has been reported that the Chinese Government will loosen up credit lending controls to textile companies, in a bid to prevent cotton prices from falling too much before the new cotton is harvested in September and October.

If the price slumps then, cotton growers will suffer big losses, Gao said. She predicted that China would produce some 6 million tons of cotton this year, approximately 1.2 million more than the previous year.

"The May and June climate was conducive to cotton growth," Gao said, "If the weather continues to be good in the next few months, output this year might exceed the historic high of 1984."

Production that year shot up to 6.25 million tons of cotton.

As for imports, Gao said the world's largest cotton consumer would not buy much more international cotton before the domestic harvest in August.

China has already signed contracts to buy up to 1.9 million tons of cotton since September, which is up to 76 per cent of low-duty import quotas (2.5 million tons in total) for this year, she said.

More and more enterprises may bring in low-tariff cotton imports this year, a great improvement for further integration with the global market, Gao said.

Most of these firms, particularly big ones such as the China National Textiles Import and Export Corporation, have already established good credit.

However, she said, some newcomers to the international cotton trade market are not as experienced.

(China Daily August 2, 2004)