The first half of 2026 witnessed a deep structural divergence in China's cotton textile market, with widening domestic-international price gaps and accelerated penetration of import yarn and chemical fiber substitutes putting pressure on mid-to-low-end yarn segments. Meanwhile, exports showed resilience, signaling a fundamental shift in global textile trade patterns.
Price Gaps Reshape Material Flows
China Customs data shows domestic cotton prices remained relatively firm in H1, while international prices weakened due to ample global supply, widening the domestic-international price gap by approximately 15% from the start of the year. This gap directly altered trade flows: Brazilian cotton, with its price advantage and supply stability, became China's top import source, with volumes surging year-on-year. In contrast, Southeast Asian textile nations like Vietnam and Bangladesh saw weaker raw material procurement, with cotton imports declining and finished garment exports falling notably.
The price gap also transmitted to the yarn market. Domestic cotton yarn maintained price resilience in high-end weaving due to stable quality and fast delivery. However, import yarn from Vietnam, India, and Indonesia continued to drop in price, flooding the domestic market with low-cost supply and squeezing profit margins for small and medium enterprises in mid-to-low-end segments. Industry data shows a sharp year-on-year increase in cotton yarn imports in H1, forming a competitive pattern of 'domestic yarn holding high-end, import yarn attacking low-end.'
Accelerated Fiber Substitution
The cotton-polyester spread and yarn-cotton spread both widened in H1, making chemical fiber substitution for cotton more economically attractive. This shift is subtly changing downstream fabric raw material structures: some weaving mills, to control costs, are increasing the proportion of polyester, viscose, and other chemical fibers in mid-to-low-end products, reducing cotton usage. For cotton textile enterprises, this means the market space for single pure-cotton product lines is narrowing, making product upgrades or blended fabric development necessary.
Export Resilience and Industry Strength
Despite weak global demand, China's textile and apparel exports remained stable in H1, with strong performance in the US market. In contrast to declining exports from Bangladesh, Turkey, and India, China's industry chain—with its complete supporting facilities, stable quality, and mature delivery system—continued to attract high-quality overseas orders. This resilience stems from the high integrity of the domestic chain, but also reveals concerns: high domestic raw material costs, dual pressure from import yarn and chemical fibers on low-end products, and insufficient off-season terminal demand.
Southeast Asian Dividends Fade
One of the most notable changes in H1 was the fading of Southeast Asia's textile industry dividends. Weak raw material procurement and terminal exports in Vietnam and Bangladesh reflect the downward transmission of sluggish overseas consumption. Meanwhile, global cotton trade influence is shifting from the US and India to Brazil, with Brazilian cotton exports steadily rising. Cotton yarn trade has formed a unique two-way flow: Southeast Asia exports low-cost yarn to China, while China exports finished textiles and apparel, widening the division of labor between domestic and foreign industries.
H2 Outlook: Divergence Continues, Refined Operations Key
As the traditional off-season ends and autumn/winter orders begin, the cotton textile market will face a turning point in H2. Expectations of a new-season cotton production decline and terminal demand recovery will be key drivers, but divergences in price gaps, trade flows, and product structures will persist. For enterprises, pure scale expansion and price competition are no longer viable.