China to stop releasing cotton reserve

China will stop releasing its cotton reserve by Sept 29 as this year's fresh cotton is launched onto the market, said an official from the National Development and Reform Commission, the country's top economic planning agency.

"Our current focus is on maintaining a stable cotton market while sticking to the national temporary reserve policy," Zhang Xianbin, an official at the NDRC's trade department, said in a statement posted on Tuesday on the China Cotton Association's website.

Zhang added that the commission "is not considering (next year's) cotton import quota for the time being".

The recent months have been a hard period for China's textile industry, thanks to rising labor and raw material costs and weak demand caused by the sluggish global economic recovery. Some industry insiders blamed the difficulty on high domestic cotton prices and proposed scrapping the country's cotton reserve policy.

But according to Zhang, the industry's shrinking exports and revenue were mainly caused by weak external demand, rather than the price difference in domestic and global markets. The country's domestic cotton price - higher than that in the global market - has the greatest impact on cotton yarn, which only accounts for 0.9 percent of the textile industry's exports.

"Supplemented by imported cotton, the impact (of the high domestic cotton price) is very limited," Zhang said, adding that the country is making efforts to reduce the difference.

"Under the current conditions, there is no better solution to substitute the current reserve mechanism, which has a long-term vision and will benefit the whole industry," he added.