What Happened To Xinjiang Cotton And The Whole Industrial Chain Behind It?

The "Xinjiang cotton" incident has caused a huge wave of public opinion for some time, but its effect is still continuing. On the one hand, we firmly oppose any stigmatization of Xinjiang cotton. On the other hand, the healthy and safe development of Xinjiang cotton and its related industrial chain are also of more concern. Now, let's take an in-depth look at it from the perspective of industry: what is the production situation of cotton in Xinjiang? What does BCI certification mean? What impact will BCI boycott Xinjiang cotton have on China's cotton industry? Will Xinjiang cotton orders be affected accordingly? And what measures have been taken by yarn enterprises to deal with them?

Xinjiang long staple cotton is in short supply with high quality

As the world's largest cotton consumer and the second largest cotton producer, China's cotton output in 2020 / 2021 is about 5.95 million tons, the total demand is about 7.8 million tons, and the annual gap is about 1.85 million tons. Among them, Xinjiang's cotton output is 5.2 million tons, accounting for about 87% of domestic production and 67% of domestic consumption. In the past 26 years, Xinjiang's total cotton yield, unit yield, planting area and commodity allocation ranked first in China. The situation of "world cotton looking at China, China Cotton looking at Xinjiang" has been formed.

And Xinjiang long staple cotton is the world's top, because the quantity is small, the quality is excellent, very precious. It is understood that under the same conditions, the growth cycle of Xinjiang long staple cotton is 10-15 days longer than that of upland cotton, and it needs more heat. Therefore, it is better than that of upland cotton. Therefore, it is known as "the best cotton" and "white gold". Because its fiber is soft and long, but its fineness and strength are far higher than ordinary cotton, so its softness is better, especially suitable for spinning high-end yarn count products.

In 2015, Yida Group invested and cooperated with many universities and scientific research institutions to complete the world's first long staple cotton gene sequencing research project. Through unremitting exploration and practice of cotton species and technology, Yida group promoted the birth of the top Xinjiang long staple cotton, which integrates the excellent genes of global high-quality long staple cotton.

Chen Haiying, chief representative of Yida group's Beijing Representative Office, said that all along, enterprises have been maintaining the image of Xinjiang long staple cotton and shouting for long staple cotton. "Xinjiang cotton is really good. We want to let you know that it is not the imported fabric that is good, but Xinjiang cotton is the best." Chen Haiying said that Yida group has been investing emotion and funds to support Xinjiang long staple cotton. In the future, Yida group will continue to consolidate the existing cotton research in Xinjiang, increase investment in Xinjiang, and carry forward China's high-quality natural fiber.

Cao Huiqing, chairman of the cotton farmers branch of China Cotton Association, introduced that in recent years, Xinjiang's cotton output has exceeded 5 million tons, with a planting area of 38 million to 40 million mu. Most of Xinjiang cotton is supplied to large domestic textile enterprises. In recent years, many textile enterprises in the mainland have moved to Xinjiang, and the number of cotton used by local textile enterprises in Xinjiang has increased greatly. At present, the annual demand of cotton in China is about 8 million tons, and the domestic cotton production is about 6.5 million tons. There is still a gap, so we need to import cotton from India, Australia and other countries.

In Xinjiang, the harvest degree of cotton field machine planting is higher and higher, and the cost is lower. Cao Huiqing introduced that Xinjiang is now promoting modular cotton planting and social services. A telephone call can call cotton picker to realize door-to-door service. It costs 150 yuan per mu of land by machine, with an average of 50 cents per kilogram. "There is no such thing as" decent work "as BCI points out. The cotton production area in Northern Xinjiang has achieved 100% machine picking, and the machine picking rate in southern Xinjiang has also reached 70% Cao Huiqing said.

BCI certification aims to control the cotton supply chain

In fact, the boycott of Xinjiang cotton by European and American countries can be traced back to around March 2020. At that time, several U.S. brands announced through their official websites that they would not cooperate with suppliers purchasing Xinjiang cotton because of the so-called "forced labor" and "ethnic discrimination" in Xinjiang.

The main basis for brands to make the above decisions is a report issued by the Australian Institute of Strategic Studies (ASPI) in March 2020. According to the report, 83 well-known brands were found using cotton products supplied by Huafu fashion and Yida group, accusing millions of people of forced labor.

This has also become the "basis" for China's textile enterprises, such as Xinjiang Aksu huafushe Textile Co., Ltd., a subsidiary of Fu Fashion Co., Ltd., and Changji Yida textile, a subsidiary of Hong Kong Yida group, listed in the entity list in July 2020.

In September 2020, the U.S. House of Representatives passed the so-called "Xinjiang related act" to prohibit many Chinese cotton textile enterprises from exporting cotton raw materials and products to the United States. This directly led to BCI's decision to "boycott Xinjiang cotton", which provides alliance certification services for global cotton industry chain enterprises.

BCI has always regarded itself as "high standard cotton" and is committed to promoting cotton standard planting and promotion activities worldwide. However, in the "boycott of Xinjiang cotton" incident, the organization stopped issuing cotton certification certificate to Xinjiang without checking the authenticity.

Cao Huiqing said that he had done research on BCI certification of Xinjiang cotton enterprises a few years ago. "In fact, the 44 criteria of BCI are very low. This does not produce cotton enterprises, to our country to develop a standard for cotton certification and OEM, over time, it has the right to speak, pricing power, about China's cotton quality, price, quantity, which will threaten the safety of China's cotton industry. Because cotton is the national strategic material, the quantity is huge, this also caused the concern of relevant aspect Cao Huiqing said.

Cao Huiqing questioned, perhaps BCI is not to certify the quality of cotton, but through OEM control of cotton resources. "BCI is a Swiss enterprise that does not grow a kilogram of cotton, but it sets the cotton standard. Why should a foreign enterprise dominate the cotton standard? Why can't we start from the leading enterprises to establish an industrial alliance? What kind of cotton textile mills need, we can plant what kind of cotton? "Cao Huiqing said. In fact, China's cotton enterprises, cotton Flower Association and textile association are also making efforts in this regard, hoping to set up a brand to produce cotton , processing, circulation, trade, textile, clothing linkage, for enterprises to solve the pain point.

On November 28, 2016, the Cotton Research Institute of Chinese Academy of Agricultural Sciences led 208 enterprises and institutions in China's cotton industry chain and local governments and agricultural authorities in major cotton producing areas to establish the national cotton industry alliance. The purpose of the national cotton industry alliance is to start from the demand side, take high-quality cotton as the starting point, according to the basic idea of what the demand side needs, the producer will produce what the seed enterprises will provide, and the scientific research institutions will develop what they will develop, so as to promote the integrated development of "technology side + production side + demand side".

Members of the national cotton Alliance said that relying on the technology of the China Cotton Research Institute, the supply chain of the national cotton alliance has completed 90 days for the b-end brand this year, from cotton harvesting to fabric completion, and directly entering the brand clothing assembly line. The ginned flowers are picked in November, and in March of the next year, the children all over the country have put on 80 pieces of soft underwear. "We have fulfilled the fast return supply of small orders of Chinese cotton products. In the face of the boycott of Xinjiang cotton by European and American brands, we should have confidence in national cotton, Xinjiang cotton and China's professional textile supply chain. We should do our job well and be fully prepared to meet the lasting challenges from the international community in the future. " Relevant person in charge said.

Prove innocence, create brand and seek self-help

What impact will BCI's boycott of Xinjiang cotton bring to Xinjiang cotton industry? Does Xinjiang cotton need to worry about its market in the future?

In this regard, Cao Huiqing said that Xinjiang cotton has an excellent reputation in national cotton textile enterprises, with outstanding performance in color, strength, length, horse value and other indicators. "If H & M, Nike, Adidas and other enterprises continue to terminate cooperation, Xinjiang cotton will seek new orders, in fact, this market is very large. Textile mills will always face the problem of raw materials. Whether there is BCI certification or not, it will not cause cotton overstock in Xinjiang. Xinjiang cotton has no market. "

The reporter found that for the cotton processing enterprises that mainly supply domestic orders, the relevant "boycott" has a limited real impact.

Guannong shares, a listed enterprise engaged in cotton production and marketing, largely because the cotton production standard of the enterprise adopts the national standard, and its sales cover the domestic market and does not involve export. Xinjiang Lihua group, which is engaged in cotton planting, purchasing, processing and textile business in Xinjiang, also said that the cotton products produced by the company were in short supply in the domestic market and did not export. The "boycott" behavior that caused heated discussion did not have a great impact on its business.

However, the cotton textile enterprises involved in export trade are not so lucky. The boycott of Xinjiang cotton by European and American brands will have an impact on their production and operation.

Some industry insiders said that the impact of terminal brand customers' boycott of Xinjiang cotton was very far-reaching and involved a wide range. A downstream supplier of an American fashion brand had to replace Xinjiang long staple cotton with American cotton when purchasing raw materials because the parent company of the brand boycotted Xinjiang cotton.

Some people familiar with the matter said that due to the boycott of Xinjiang cotton, the proportion of Yida group's OEM business income is shrinking, and it is expected to shrink to about 30% in the next five years. In 2020, the proportion of the group's OEM business income is still around 70%.

However, Yida group did not wait to die, but actively launched a series of "self-help". On the one hand, it submitted to the United States the evidence that its subsidiaries did not force workers to work, and at the same time disclosed that independent third-party audit institutions conducted independent audit in three cotton spinning factories in Xinjiang. The results showed that the full score was 100, and the scores of over three cotton mills were 85 or above, and there was no forced labor.

In addition, Yida group's more important initiative is to establish its own brand. In recent years, the group is actively promoting the development of independent retail brands "Pai" and "shirushi". Both brands focus on high-end high-quality Xinjiang cotton fabrics. It is understood that the proportion of the group's independent brand business in the total revenue will reach 30% within five years.

Transfer supply chain to avoid foreign trade risk

According to BCI's official website, by the end of 2020, the number of BCI members has exceeded 2000. Members are mainly retail brands, cotton merchants, yarn factories, growers' organizations, etc. Many Chinese cotton textile enterprises, including those in Xinjiang, are also members of the program.

However, most of these Chinese enterprises joining BCI are in the upstream or middle end of the industrial chain. The main reason why they join BCI is that they hope to occupy a more favorable competitive position in the export trade market through the supply chain alliance formed by BCI. The downstream member enterprises of the industrial chain are almost all European and American enterprises. Once the European and American enterprises really boycott Xinjiang cotton, cotton textile enterprises involved in export trade business are bound to be impacted.

In order to deal with the uncertainty risk from the international market, the common choice of textile enterprises is to transfer the supply chain. As early as a few years ago, China's large textile and clothing enterprises began to build factories in Southeast Asia with lower manufacturing costs, or as far away as Mexico to lay out global supply chain network, so as to meet the demands of European and American enterprises seeking lower price supply chain partners. Huafu fashion and Yida group have such actions.

As early as 2013, Huafu started to set up subsidiaries in Vietnam and invested in the construction of factories. Shortly after it was listed in the "entity list" of the United States, Huafu fashion increased its investment in Vietnam and announced the construction of 500000 spindles of new yarn project, thus forming two production bases in Xinjiang and Vietnam. Xinjiang factories use Xinjiang cotton as raw materials to serve Chinese enterprises, while factories in Vietnam will use locally purchased cotton, mainly serving overseas customers.

Yida group also has production bases in Sri Lanka and Vietnam, and sales offices all over the world.

Industry insiders said that for the affected yarn enterprises, domestic sales to undertake downstream orders of Chinese brands is also a way. However, for large enterprises that accept global orders, it will take time for them to make up for the loss of overseas orders through the increment of domestic orders.

"Domestic orders are too small for them now." Industry insiders believe that. However, it is worth noting that the price of high-end and high-quality Xinjiang cotton may become more favorable because of "boycott", so as to benefit the downstream enterprises. On the one hand, due to the impact of boycott, Xinjiang cotton exports decreased and remained in the domestic market, so there will be a certain increase, which will have a certain impact on the balance of supply and demand, resulting in slightly lower prices. On the other hand, the export to domestic cotton does not need to be "gilded".

Some data show that the price of cotton certified by BCI can be tens to hundreds of yuan higher than ordinary cotton. "When companies in all sectors of the industry chain start to accept domestic orders, we no longer need to pay for the premium generated by the above certification." Industry analysis.