China's cotton textile chain is undergoing deep restructuring driven by widening domestic-international price spreads. In H1 2026, international cotton prices remained weak while domestic prices stayed firm, reshaping raw material flows and accelerating chemical fiber substitution for cotton. Meanwhile, traditional Southeast Asian textile exporters saw order contractions, while China's textile and apparel exports held steady, supported by its complete industrial chain. Structural divergence has become the new normal.
Price Spreads Reshape Raw Material Sourcing
The most notable change occurred on the raw material side. Chinese customs data show Brazilian cotton has become the top import source, with volumes surging year-on-year due to price and supply advantages. In contrast, Vietnam and Bangladesh saw declining cotton import appetite and falling garment exports. Widening spreads made imported raw materials more cost-effective, prompting Chinese mills to adjust procurement strategies and increase foreign cotton usage.
Yarn markets also diverged. Domestic cotton yarn maintained price strength in high-end weaving due to stable quality and fast delivery, while imported yarn from Vietnam, India, and Indonesia fell in price, flooding China's mid-to-low-end markets and squeezing small mills' margins. Cotton-polyester spreads also widened, improving the economics of chemical fiber substitution and subtly altering downstream fabric input structures.
Global Cotton Trade Landscape Reshuffles
Global cotton trade influence shifted in H1. Brazil's cotton exports rose steadily, while traditional exporters like the U.S. and India saw volumes shrink. Yarn trade formed a two-way flow: Southeast and South Asian countries exported low-cost yarn to China, while China used its weaving and garment processing chains to export finished textiles globally. This complementary yet competitive pattern widened the division of labor between China and foreign producers.
Southeast Asia's textile dividend faded. Bangladesh, Turkey, and India saw year-on-year declines in textile and apparel exports amid weak global demand. China, however, posted strong exports to the U.S., leveraging its complete supply chain, stable quality, and mature delivery systems to secure premium orders and maintain global market share.
H2 Turning Point and Refined Operations
As the traditional textile off-season ends and autumn/winter orders begin, the cotton market faces a new turning point in H2. Expectations of a new-crop cotton output cut and recovery in seasonal demand will be key drivers. However, divergences in price spreads, trade flows, and product structures will persist, marking the end of uniform boom-bust cycles and the start of a structurally differentiated operating environment.
For enterprises across the supply chain, scale expansion and low-price competition are no longer viable. Companies must adopt refined operations—optimizing raw material mixes, upgrading products, and diversifying markets—to stay competitive.