Globecot and CN Cotton held a Cotton Conference in Jinan, China during October 9 -11. This is the first of a series of highlights from the conference.

A top National Development and Reform Commission (NDRC) official spoke at the Globecot/CN Cotton Annual Cotton Conference in Jinan, China; and in his remarks, there was a suggestion that the sliding-scale import tax scheme would likely be replaced in 2008. While the sliding-scale tax has helped stabilize China´s domestic cotton price, it has also caused major problems for the Chinese textile sector. The tax has significantly impacted the competitiveness of Chinese textile production. It has also made it difficult for China to import high-grades and has made it harder for mills to make longer-term decisions in regard to market prices. In addition, the government has determined that the tax adds new burdens and costs to its process by requiring intense government monitoring and supervision by the Customs Department.

Amid these problems, the NDRC has launched an investigation into the sliding-scale tax import scheme for cotton and the possible alternatives, which has initiated an intense debate between the interests of growers and the textile sector. The study indicates that the sliding-scale tax does not fully protect the domestic cotton price and that no other cotton importer in the world uses such a system.

It would appear that the NDRC is considering changing the sliding-scale tax scheme, but no details of how it would be directly modified has been released. It was made clear that the government is considering offering a direct subsidy to growers for maintaining income and cotton acreage; and if this happens, the sliding-scale tax would be replaced with a fixed rate. The textile industry is pushing for changes to the sliding-scale tax and other adjustments that would improve the industry´s competitiveness. The international cotton trade would also welcome such a move.

Source: Globecot