China provides huge subsidies to the cotton sector. The country supports cotton production by controlling cotton import volumes and values and by applying border protection measures based on quotas and sliding scale duties, with an effective tariff of 40 per cent on cotton imported without a quota.

Total direct subsidy payments provided to cotton producers in China, in addition to border protection support, were $2.4 billion in 2018 up from $2 billion in 2017. The increase is attributed to higher production during 2018, while the difference between the target and the market price remained almost unchanged. In addition to direct subsidies, border protection benefits are enjoyed by producers in China.

China also maintains a strategic reserve of cotton, serving as a national buffer stock. China releases cotton to the market from reserve through a system of auctions when there is a shortage, and replenishes the reserve in times of abundance, thus supporting prices. Since 2016, China restricted cotton imports by issuing only the tariff-rate-quota import quotas, with the objective of reducing government stocks. As a result of interventions and quotas, domestic cotton prices in China have exceeded international prices during the past three seasons.

In addition, growers are paid a subsidy for using high quality seeds, although small-holder farmers do not benefit significantly from this policy.