In the first half of 2026, China's cotton textile industry experienced unprecedented structural divergence. While textile exports remained stable, imported yarn surged and chemical fiber substitution accelerated, with domestic-international cotton price gaps widening significantly. Industry data shows domestic cotton stocks at reasonable levels, but downstream spinning slowed and weaving demand weakened, dragging raw material consumption.
Global Cotton Supply-Demand Shifts
The global cotton market is at a critical juncture between crop years. The previous season saw ample supply and high inventories, capping international price rebounds. However, production forecasts for the new season are down, raising expectations of tighter supply and supporting prices in H2. Chinese customs data shows a surge in cotton imports, with Brazilian cotton becoming the top source due to price and supply advantages. Conversely, Vietnam and Bangladesh reduced raw material purchases, with cotton imports declining and garment exports falling sharply.
Global Cotton Trade Restructuring
Widening domestic-international price gaps have reshaped trade flows and yarn pricing. Brazilian cotton exports rose steadily, while traditional exporters like the US and India saw declines, shifting global trade leverage. Yarn trade now features a two-way flow: Southeast Asian countries export low-cost yarn to China, while China leverages its integrated weaving and garment production to export finished goods globally. This division deepens, creating a mix of complementarity and competition.
China's Resilience vs. Southeast Asia's Fading Dividends
Amid weak global demand, many countries saw textile export declines, including Bangladesh, Turkey, and India. In contrast, China's textile and apparel exports remained stable, with strong performance in the US market, supported by a complete supply chain and reliable quality. This indicates that Southeast Asia's textile dividend is fading, while China's industrial completeness and resilience underpin export strength.
Changing Raw Material Substitution
Price divergence dominated H1. International cotton prices weakened while domestic prices held firm, widening the gap and making imported raw materials more cost-effective, prompting mills to adjust procurement. Yarn markets also diverged: domestic cotton yarn prices remained firm, while imported yarn from Vietnam, India, and Indonesia fell, squeezing margins for small and medium mills. Meanwhile, the cotton-polyester price gap widened, improving the economics of chemical fiber substitution and gradually altering downstream fabric raw material mixes.
H2 Turning Point and Refined Operations
As the traditional off-season ends and autumn/winter orders begin, H2 will bring a new turning point. Expectations of lower new-crop cotton output and seasonal demand recovery will drive the market, with divergences in price gaps, trade flows, and product mix persisting. For enterprises, scale expansion and low-price competition are no longer viable. Refined operations—optimizing raw material mix, upgrading products, and diversifying markets—are essential to seize opportunities.