The National Development and Reform Commission has allocated 894,000 tons of import quotas of cotton, the first load for next year.

"The quotas will be allocated to enterprises at the end of this year," said Wang Jianhong, deputy-secretary general of the China Cotton Association.

The government may also issue additional quotas for 2006 at any time, according to supply and demand as well as prices at the time.

"The gap between China's domestic cotton production and demand may exceed 3 million tons in the coming year," Wang predicted.

Although some textile producers in China have been influenced by trade conflicts with the United States and the European Union, total demand remains high.

Experts predicted earlier this year that in 2005 the country would suffer a 3.2 million ton gap between domestic production and demand.

That was because cotton growing areas have decreased by between 10 to 13 percent this year from 2004 and demand for the product was expected to increase when the decade-long international quota system was removed between all World Trade Organization (WTO) members at the beginning of the year.

"But it is really complicated to calculate the gap, as the industrial stock, the stock of enterprises, is hard to estimate," Wang said.

He said China's actual cotton output this year is likely to be influenced by the weather in the harvest season.

The price of cotton on the domestic market is not expected to witness great changes in the near future, he said, as the sliding duty China implemented on cotton imports would keep import prices at around 12,000 yuan (US$1,480) per ton, guaranteeing a steady marketplace, Wang said.

Tariffs collected from the additionally issued quotas will range from 5 to 40 per cent, while duty for first-time issued quotas is only 1 per cent.

Last year and 2003 saw great fluctuations in the cotton price because of a sudden lack of supply. The price was as high as 18,000 yuan (US$2,219) in early 2003 but it declined sharply to around less than 1,200 yuan (US$1,480) after the country reaped a record amount of cotton in 2004.

The Chinese Government twice issued 1.4 million tons of extra import quotas for cotton this year.

Together with the 894,000 tons issued in September 2004 and the 200,000 tons left over from last year, the country can import some 2.5 million tons of cotton this year.

China imported 847,000 tons of cotton in the first half of this year, reflecting a decline of 43.7 per cent from the previous year, statistics from the Ministry of Agriculture said.

However, the ministry predicted that cotton imports would further increase in the second half of this year.

It said domestic cotton output was not able to match demand despite output recording a new high in 2004.

According to its commitment to the WTO, China promised that from 2004 it would increase its import quotas of cotton to 5 per cent of China's total output in 2003 (from less than 3 per cent in 2001).

Thirty-three per cent of the allocation figure is reserved for state-owned businesses.

Qualified enterprises can apply for the quotas by various means, including general trade and barter, the National Development and Reform Commission said in a statement on its website.

The commission has also issued 9.64 million tons of import quotas for wheat, 7.2 million tons for corn and 5.32 million tons for rice.

(China Daily September 21, 2005)