Cotton imports doubled year-on-year, yarn imports jumped more than 50%, yet domestic spinning output fell 6.5%. Put these three figures together and the picture is not one of booming demand, but of a manufacturing segment being quietly reshaped by import substitution.
Price Rally and Narrowing Spread
In August 2026, cotton futures and spot prices rose steadily at home and abroad. Both Zhengzhou cotton futures and ICE cotton hit new year-to-date highs, but external cotton gained more, visibly narrowing the price spread between domestic and imported cotton. What does a narrower spread mean? For domestic mills, the comparative advantage of imported cotton is weakening, and procurement strategies that previously locked in costs through the spread now need recalculation.
From an industrial transmission perspective, stronger external cotton typically pushes up international yarn quotes first, then forces domestic yarn prices higher through imported yarn channels. But domestic spinning output fell 6.5% year-on-year, suggesting mills did not expand operations in response to higher prices. Instead, they are contracting supply, whether voluntarily or under pressure. Behind this lies both the strain of order outflows and the squeeze on margins from elevated raw material costs.
The Divergence Between Surging Imports and Falling Output
China Customs data and publicly available industry figures show that in January-July this year, China's cotton imports rose 100% year-on-year, while cotton yarn imports grew 56%. These double-digit, near-doubling growth rates stand in sharp contrast to the 6.5% decline in domestic spinning output.
The logic behind this divergence is not complicated. When imported yarn is competitive on price and delivery, downstream weavers and garment makers prioritize imported yarn, diverting orders away from domestic spinners. At the same time, the surge in cotton imports indicates that domestic mills are still buying large volumes of foreign cotton, but the raw material purchased does not necessarily translate into domestic yarn output. Some may flow through processing trade channels, while some reflects insufficient operating rates amid capacity reduction.
For upstream ginners and traders, the surge in cotton imports means domestic resource absorption channels are narrowing, and selling pressure after the new crop arrives should not be underestimated. For downstream buyers, the cost-performance window for imported yarn remains open, but they need to watch for the risk of imported yarn quotes catching up with a lag as external cotton prices continue to climb.
Structural Signals Behind Modest Export Growth
Textile and apparel exports rose 2.2% year-on-year in January-July, a modest pace. Against the backdrop of surging cotton and yarn imports, this growth rate suggests no strong pull from the export side, but rather maintenance of existing orders.
It is worth noting that modest export growth coexists with falling spinning output, implying that the value-added distribution along China's textile chain is shifting. Export products are using more imported yarn, while the share of domestic spinning output is declining. For mills focused on grey fabric and yarn, this means a pure capacity-driven model is increasingly untenable. Differentiated products and quick-response capability are becoming the real levers for winning orders.
From a regional industrial belt perspective, procurement structures in fabric hubs like Keqiao and Shengze will be the first to reflect this change: the share of imported yarn is rising, and local spinners' bargaining power is weakening. The Nantong home textile cluster is more focused on the pace at which cotton prices transmit to end-product costs, as home textile orders are more sensitive to raw material prices.