China's textile and apparel exports recorded a slight month-on-month increase in the first half of the year, while major Southeast Asian producers saw synchronized export contractions. This contrast unfolds against the backdrop of stabilizing domestic and international cotton prices and a firm domestic basis, revealing structural differences in order competition among industrial clusters.
Cotton Price Stabilization and Widening Spread
In June 2026, domestic and international cotton prices ended their months-long decline and stabilized. The domestic basis remained firm, indicating adequate downstream demand for spot goods. However, ICE cotton futures underperformed Zhengzhou cotton futures, keeping the price spread between domestic and international markets at a high level. This means imported cotton retains a cost advantage, but domestic mills prefer using domestic cotton to avoid exchange rate fluctuations and delivery uncertainties.
For buyers, the high spread is unlikely to narrow quickly in the short term, maintaining the cost-effectiveness of imported cotton but requiring longer lead times and currency risk management. Mills need to balance domestic and imported cotton in their inventory strategies to meet varying client cost sensitivities.
Regional Divergence in Export Performance
China's textile and apparel exports in the first half remained robust, with a slight month-on-month increase, continuing the recovery trend from the second half of 2025. This growth is not driven by a global demand rebound but by China's comprehensive advantages in delivery reliability, product diversity, and scale. Meanwhile, major Southeast Asian producers saw synchronized export contractions, with Bangladesh leading the decline, highlighting its vulnerabilities in energy costs, infrastructure, and political stability.
Order flows are shifting subtly: some orders previously moved to Southeast Asia for tariff and labor cost reasons are returning to China due to delivery reliability issues. However, this return is not broad-based, focusing on high-value, time-sensitive categories. For traditional fabric clusters like Keqiao and Shengze, this means differentiated products can command higher margins, while standard items will continue to face low-price competition from Southeast Asia.
Resilience and Risks in the Supply Chain
The first-half data confirms the long-term investment in supply chain resilience by China's textile industry—from raw material reserves to dyeing capacity and garment assembly, forming a competitive moat difficult to replicate quickly. However, risks remain: the high domestic-international cotton price spread means domestic mills face higher raw material costs than international competitors, squeezing margins if global demand falters.
Moreover, the export contraction in Bangladesh may be temporary rather than a long-term trend. As its infrastructure improves and energy supply stabilizes, the pace of order repatriation may slow. The real challenge for China's textile industry is transitioning from a 'scale advantage' to an 'efficiency and innovation advantage,' rather than relying solely on delivery speed and category breadth.