The Agricultural Development Bank has recently issued a notice, instructing local banks to verify cotton companies’ qualifications for loan application and finish the work before Aug. 20. Cotton companies are required to return before the end of 2007/2008 loans issued last year. This has exerted a great pressure on companies whose capital is taken up by cotton, particularly in Xinjiang.
To assist Xinjiang in cotton outshipment, the Ministry of Railway decided to ship 11,000 MT cotton from Xinjiang to other provinces every day from July 10 to Aug. 31. The central government agreed to provide a subsidy of RMB400/MT to Xinjiang’s cotton outshipment before Aug. 31.
BOABC considers that Xinjiang cotton companies are likely to lower cotton price to promote sales in July and Aug. Increased cotton supply may drive down cotton price in the consuming regions in the short run. But in view of worldwide inflation, growing cost of cotton production and wide gap between demand and supply at home, cotton price is presumed to pick up when Xinjiang’s cotton stock is depleted.
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