BEIJING: China, the world’s top consumer of cotton, will slash its import quotas for 2015 to boost demand for domestic fibre, a senior official said on Monday, driving futures prices in both China and the United States lower.

Beijing will only provide import quotas next year for the 894,000 tonnes that it is required to offer at low duties under commitments with the World Trade Organisation, according to Liu Xiaonan, vice head of the economy and trade department at the National Development and Reform Commission.

Previously, China has offered another type of quota, in addition to the one compliant with the WTO, but Liu said no additional quota would be made available next year.

Non-quota imports are subject to a 40 per cent tariff, so the restricted availability of import quotas will inevitably dampen Chinese demand for foreign cotton.

In the 2013/14 marketing year, traders estimated that Beijing had issued 600,000-800,000 tonnes through the additional quota that will not be available next year.

“Apart from the 894,000 tonnes of import quota required under WTO entry commitments ... we will not issue additional import quota, instead guiding domestic textile companies to use more Chinese cotton,” Liu told reporters.

To encourage domestic producers, China will offer subsidies to provinces in the Yellow River and Yangtze River valley growing areas, said another official at NDRC.

The government had previously said a new direct subsidy for cotton farmers would only be available to Xinjiang, the country’s top growing region, raising fears that domestic cotton output would drop sharply.

Published in Dawn, September 23rd , 2014