In the first half of 2026, China's textile industry delivered a performance characterized by stability. Customs data shows that textile and apparel exports remained solid overall, with a slight month-on-month increase. Meanwhile, after earlier fluctuations, both domestic and international cotton prices stabilized in June, with domestic basis remaining firm. This combination signals that despite lingering global demand uncertainties, the resilience of China's textile supply chain is being tested and proven.
Supply-Demand Dynamics Behind Cotton Price Stabilization
The most notable market shift in June was the simultaneous halt of the downtrend in both domestic and international cotton prices. The main Zhengzhou cotton contract stabilized and rebounded, while ICE cotton futures performed relatively weakly, keeping the domestic-international price spread at a historically high level. This pattern reflects an ongoing tug-of-war between restocking demand from domestic textile mills and the high cost of imported cotton. The firm domestic basis indicates that the discount of spot prices to futures has narrowed, suggesting a pickup in downstream purchasing interest near the price bottom.
On the supply side, domestic new cotton planting area remains largely stable, with no significant weather-related yield reductions expected. Internationally, bumper crops from Brazil and Australia continue to exert pressure, but weak US cotton export data has limited upward momentum for ICE futures. The persistently high domestic-international price spread has objectively discouraged domestic mills from purchasing imported cotton, prompting them to rely more on domestic resources, which in turn has indirectly supported Zhengzhou cotton prices.
Export Structure: China vs. Southeast Asia
China's steady textile and apparel export performance in H1 contrasts sharply with the simultaneous contraction among major Southeast Asian producers. Bangladesh saw the largest year-on-year decline in exports, while growth rates in Vietnam and India also slowed significantly. This divergence stems from multiple overlapping factors:
- Western brands' efforts to 'de-risk' supply chains have not fully translated into a substantive shift of orders away from China. Instead, unstable capacity and longer lead times in Southeast Asia have led to some orders returning to China.
- China's cost advantages and supporting capabilities in upstream segments like chemical fibers and fabrics mean that even when final product orders flow to Southeast Asia, intermediate goods exports can still grow.
- RMB exchange rate fluctuations have, to some extent, enhanced the price competitiveness of Chinese export products.
For Chinese textile foreign trade companies, this means the competitive landscape is shifting from a 'zero-sum game' to 'structural differentiation.' Suppliers capable of offering high value-added products and quick response capabilities are gaining more pricing power.
Outlook for H2: Price Floor Confirmed, Demand Remains Key
The current domestic and international cotton prices have largely confirmed a cyclical bottom, but the scope for a rebound depends on a tangible recovery in end-user demand. Whether Western markets will start a restocking cycle will be the biggest variable in the second half. Historically, cotton prices tend to find a bottom in June-July and then experience a seasonal rebound in September-October. However, this year, the following risks warrant caution:
- Slowing global economic growth may suppress apparel consumption, especially in non-essential categories.
- The pace of destocking by domestic textile mills: if downstream orders fail to sustain, restocking momentum may weaken.
- On the policy front, the long-term impact of restrictions related to Xinjiang cotton remains to be fully digested.
For buyers, the current price range offers a certain margin of safety, but aggressive chasing of highs is not advisable. It is recommended to use futures tools to lock in forward procurement costs while paying close attention to the spread between domestic and imported cotton, adjusting the cotton mix flexibly.