China's cotton textile chain is undergoing a deep restructuring. In the first half of 2026, a key signal is the widening domestic-international cotton price gap, which has driven a surge in low-priced imported yarn and made chemical fiber substitution more economical, squeezing mid-to-low-end yarn markets.
Price Gap Reshapes Raw Material Trade Flows
Chinese customs data shows cotton imports surged year-on-year in H1, with Brazilian cotton becoming the top source due to price and supply stability. This reflects persistently weak international cotton prices versus relatively firm domestic prices. The cost advantage of imported raw materials has pushed mills to adjust procurement structures.
The yarn market is similarly polarized: domestic yarn maintains price resilience in high-end weaving due to stable quality and fast delivery, while imported yarn from Vietnam, India, and Indonesia has seen prices fall, flooding the mid-to-low-end market and compressing margins for small and medium mills.
Chemical Fiber Substitution Accelerates
Industry data shows that the price gaps between yarn and cotton, and between cotton and polyester, have widened, making chemical fiber more economical. This is subtly changing downstream fabric makers' material choices—blended or pure chemical fiber solutions are gaining ground in some mid-to-low-end applications under cost pressure.
This means cotton mills face dual pressure: competition from imported yarn and substitution threats from synthetic fibers. For factories focused on pure cotton mid-to-low-end products, profit margins are being squeezed from both sides, making scale-driven growth unsustainable.
Export Resilience vs. Southeast Asia's Retreat
In contrast to the domestic pressure, textile and apparel exports have remained stable. Against a backdrop of weak global demand, China's exports held steady, with particularly strong performance in the US market. This is underpinned by the country's complete industry chain, stable quality, and mature delivery systems.
Meanwhile, Southeast Asian countries like Vietnam, Bangladesh, Turkey, and India have seen year-on-year declines in textile and apparel exports, with finished garment exports dropping sharply. Weak overseas consumption has transmitted downward pressure, reducing local spinning mill operating rates and cotton import willingness. The industrial dividends Southeast Asia once enjoyed are fading.
Global Cotton Trade Influence Shifts
Export performance among major cotton-producing countries is diverging. Brazil's cotton exports are steadily rising, supplying major consuming countries, while traditional exporters like the US and India are seeing volumes shrink. This shift in global cotton trade influence is also reshaping Chinese mills' sourcing options.
Yarn trade has formed a unique two-way flow: Southeast and South Asian countries export low-priced yarn to China, while China leverages its complete weaving and garment manufacturing chain to export finished textiles globally. The division of labor between China and foreign countries is widening, creating a landscape of both complementarity and competition.
Turning Point in H2 and the Need for Refined Operations
As the traditional slack season ends and autumn/winter orders pick up, the cotton textile market will face a new turning point in H2. Expectations of a new-season cotton crop reduction and recovery in peak-season demand will be key drivers, but the divergence in price gaps, trade flows, and product mix will persist.
For enterprises across the chain, the era of scale expansion and low-price competition is over. Refined operations—optimizing raw material mix, upgrading products, and diversifying markets—will be the core path to stability and opportunity.