China's top cotton producer, a quasi-military body formed 60 years ago to settle the far west Xinjiang area, is resisting a government policy that could force it to cut output in an industry employing hundreds of thousands in the restive region. Beijing has pledged to end a costly stockpiling program that has artificially inflated cotton prices and in Xinjiang helped underpin an influx of Han Chinese workers, creating friction in an area home to the Muslim Uighur people.

Reluctant to accept the current weak market price, the Xinjiang Production and Construction Corps (XPCC) has asked the government to buy part of its crop and store it in state reserves. XPCC has become a sort of state within a state and gained a dominant role in industries such as cotton, where it employs about 2,00,000 mainly Han Chinese on some of Xinjiang’s best land.

Beijing has promised subsidies to help cushion the impact of ending stockpiling, but the total amount is unclear and with the local cotton price plunging any threat to the industry could be a fresh source of competition for jobs. Beijing previously acquired almost all of China’s cotton at high prices and then auctioned it off to textile firms. But it incurred huge costs and left masses of fiber unsold in reserves.

Its new policy has already caused prices to plunge. A subsidy - a replacement for stockpiling - may not be enough to encourage farmers to keep growing.