China's textile and apparel exports delivered a stable performance in the first half of 2026. According to customs data, total exports achieved a slight month-on-month increase, outperforming the same period last year. This signals that, as overseas destocking nears completion and restocking demand slowly picks up, the resilience of China's textile supply chain is being tested and proven.
The Supply-Demand Logic Behind Cotton Price Stabilization
The stabilization of domestic and international cotton prices in June was the most notable price signal of the first half. The Zhengzhou Cotton futures contract found support after earlier overselling, with domestic basis remaining firm—reflecting increased willingness among downstream mills to restock at lower levels. In contrast, ICE cotton futures were relatively weaker, keeping the domestic-international price spread at a historical high. This means the cost advantage of imported cotton yarn has diminished, reducing the impact on the domestic yarn market.
From a supply-demand perspective, global cotton production expectations have stabilized, and consumption has not deteriorated significantly. As the world's largest cotton consumer, China's textile operating rates remain within a reasonable range, providing a floor for cotton prices. However, the wide price spread may curb some foreign cotton purchases, affecting global trade flows.
Export Patterns: China's Gains vs. Southeast Asia's Contraction
China's stable export performance in the first half contrasts sharply with the synchronized contraction among major Southeast Asian producers. Bangladesh recorded the steepest year-on-year decline, while growth in Vietnam and India also slowed. This divergence stems from multiple factors:
- The trend of orders from European and American markets returning to China continues, especially in high-value-added categories, where China's supply chain completeness and delivery efficiency are clearly advantageous.
- Southeast Asian countries face structural bottlenecks such as rising electricity costs and labor shortages, forcing some orders to shift.
- RMB exchange rate fluctuations have occasionally benefited Chinese exporters' price competitiveness.
For Chinese textile foreign trade enterprises, this presents both opportunities and challenges. In the short term, order returns help alleviate capacity underutilization; but in the long run, Southeast Asian countries are still advancing industrial upgrading and cost optimization. China cannot rely solely on price advantages but must build deeper barriers in technology, branding, and green production.
Profit Distribution Along the Supply Chain
The impact of cotton price stabilization is uneven across the chain. Upstream ginners and traders saw faster profit recovery from the price rebound, but midstream spinning and weaving sectors still face a 'two-sided squeeze': raw material cost volatility and limited bargaining power for end-order prices.
Firm domestic basis indicates good spot market liquidity, but downstream fabric mills and garment factories have low acceptance of high-priced cotton. Some enterprises are adjusting product mixes—increasing the proportion of chemical fiber blends and reducing pure cotton usage—to hedge against cost pressure. This trend is particularly evident in categories like denim and home textiles.
Outlook for H2 2026: Certainty Amid Uncertainty
Looking ahead to the second half, uncertainties remain for textile foreign trade. The pace of economic recovery in Europe and the US, geopolitical risks, and potential trade policy changes could all affect order rhythms. However, several relatively certain judgments are worth noting:
First, the probability of a sharp drop in cotton prices is low. Global cotton inventory-to-consumption ratios are in a reasonable range, and new season planting area expectations are stable, so there will be no significant oversupply. Second, China's structural advantages in textile exports are difficult to replace in the short term, especially in fast-response orders and functional fabrics, where supply chain responsiveness remains a core competitiveness. Third, the domestic-international price spread is likely to narrow. As ICE futures gradually stabilize, imported cotton costs will become more reasonable, helping restore normal trade flows.