China’s cotton imports are falling. Reasons include high levels of cotton in consignment, burgeoning industrial and commercial stocks, and stagnant consumption growth. Over a fifth of China’s 2018-19 cotton imports are estimated to have remained in consignment.

Although 2019-20 imports are lower than the previous year, the total quantity forecast to clear customs and enter the free market is expected to grow. Cotton in consignment for 2019-20 is forecast to halve from the previous year with reduced incentives for storage. Cotton stored in bonded warehouses was estimated to have more than doubled at the end of 2018-19 from the previous year. Private enterprises’ incentive to incur costs of storing cotton in consignment is mostly driven by China’s import policies and allocation of import quota when issued. Due to restrictive import policies pertaining to quota licenses for commercial and industrial enterprises, importers prefer to store cotton close to the port of entry. This pertains to uncertainty surrounding the timing and availability of quota for merchants.

China is still expected to be the world’s largest importer in 2019-20, exceeding the second largest, Vietnam, by nearly 4,40,000 tons. This is expected to stabilize domestic supplies, even as total stocks are expected to be the lowest since the country’s formal price support program was initiated more than eight years ago.