Views:1 Author:Site Editor Publish Time: 2019-05-21 Origin:Site
Pakistan kept the largest cotton yarn import origin of China since 2012 and its cotton yarn imported by China accounting for nearly 40% in total imports of China. In the same year, The First Imported Cotton Yarn Forum hosted by CCFGroup launched and a large amount of Pakistani cotton yarn, Indian one and Vietnamese one was introduced to China successively. After 2013, surpassed by India and Vietnam, Pakistan slid to the third major cotton yarn import origin of China during 2016-2018. Will the tariff adjustment this time reverse the status?
Firstly, interpretation on policy and forecast
a. The 3 product categories are defined as follows:
Category 1. For China and Pakistan, this refers to all products with applied MFN tariff rates higher than 15%.
Category 2. For China and Pakistan, this refers to all products with applied MFN tariff rates between 5% (inclusive) and 15% (inclusive).
Category 3. For China and Pakistan, this refers to all products with applied MFN tariff rates lower than 5%.
b. Implementation timeframes
|Product category||Not later than 1 Jan 2006||Not later than 1 Jan 2007||Not later than 1 Jan 2008|
Remark: Starting Jan 1 2006, China imposed preferential tariff rate on some products originated in Pakistan, including single cotton yarn, plied cotton yarn and cotton fabric.
|HS code||Commodity name||MFN rate (％)||Agreement rate (％)||Change (％)|
|52051100||Uncombed single cotton yarn, cotton≥85%, yarn≥714.29decitex||5||3.5||30|
|52051200||Uncombed single cotton yarn, cotton≥85%, 232.56≤yarn＜714.29decitex||5||3.5||30|
|52051300||Uncombed single cotton yarn, cotton≥85%, 192.31≤yarn＜232.56decitex||5||3.5||30|
|52051400||Uncombed single cotton yarn, cotton≥85%, 125≤yarn＜192.31decitex||5||3.5||30|
|52051500||Uncombed single cotton yarn, cotton≥85%, yarn＜125decitex||5||3.5||30|
|52052100||Combed single cotton yarn, cotton≥85%, yarn≥714.29decitex||5||3.5||30|
|52052200||Combed single cotton yarn, cotton≥85%, 232.56≤yarn＜714.29decitex||5||3.5||30|
|52052300||Combed single cotton yarn, cotton≥85%, 192.31≤yarn＜232.56decitex||5||3.5||30|
|52052400||Combed single cotton yarn, cotton≥85%, 125≤yarn＜192.31decitex||5||3.5||30|
|52053100||Uncombed cabled cotton yarn, cotton≥85%, single yarn≥714.29decitex||5||4.5||10|
|52053200||Uncombed cabled cotton yarn, cotton≥85%, 232.56≤single yarn＜714.29decitex||5||3.5||30|
|52054100||Combed cabled cotton yarn, cotton≥85%, single yarn≥714.29decitex||5||4.5||10|
|52054200||Combed cabled cotton yarn, cotton≥85%, 232.56≤single yarn＜714.29decitex||5||3.5||30|
|52054600||Combed cabled cotton yarn, cotton≥85%, 106.38≤single yarn＜125decitex||5||4.5||10|
|52054700||Combed cabled cotton yarn, cotton≥85%, 83.33≤singel yarn＜106.33decitex||5||4.5||10|
|52054800||Combed cabled cotton yarn, cotton≥85%, single yarn＜83.33decitex||5||4.5||10|
|52061100||Uncombed single cotton yarn, cotton＜85%, yarn≥714.29decitex||5||4.5||30|
|52061200||Uncombed single cotton yarn, cotton＜85%, 232.56≤yarn＜714.29decitex||5||3.5||30|
|52061500||Uncombed single cotton yarn, cotton＜85%, yarn＜125decitex||5||3.5||30|
|52062100||Combed single cotton yarn, cotton＜85%, yarn≥714.29decitex||5||4.5||10|
|52071000||Combed single cotton yarn, cotton＜85%, yarn≥714.29decitex||6||5||17|
Therefore, according to the tariff implementation plan, the import tariffs of China on Pakistani yarns in the following years are still mostly 3.5%, and some products at 4.5%. Then in 2008 and around 2010, there were rumors of zero-tariff on Pakistani yarn in the market. At that time, according to the market verification, the implemented rate was the agreement rate, but some local enterprises obtained state subsidies because of the implementation of targeted policies. It stopped in around 2014, and the following years were completely market-oriented. In those years, the Indian and Vietnamese yarns increased rapidly. Without targeted policy subsidies, Pakistani yarn market share decreased significantly. Today, targeted preferential policies are restarted in a certain way, which is reported that the rules are still in secrecy. From the content that has been publicly disclosed by the Pakistan and China, the cotton yarn is explicitly included in the tariff reduction list. According to CCFGroup, the tariff reduction is considerable and most of the companies that obtain targeted preferential policies are also shared with users.
Secondly, about the import volume and substitution
At present, Pakistan is the third largest cotton yarn import origin of China with annual export volume to China down from 588kt in 2013 to 324.9kt in 2018. If the price spread of the same specification between Pakistani and Chinese cotton yarn, the import volume of China from Pakistan is expected to increase to a certain extend. From end-2018, according to the ordering price of Pakistani cotton yarn, the tariff adjustment is in expectation. Therefore, the price spread between Pakistani and Chinese cotton yarn is the key factor affecting later ordering. Once there is enough gap, downstream demand will show its activeness.
Besides, the major products of Pakistan textile industry did not change much and were still mainly low-count and siro-spun one. Among them, exports of single carded cotton yarn below 8S and within 8-25S accounted for 92% of the total to China. So Pakistani cotton yarn has limited threat to other cotton yarn market.
It can be seen from the detailed data that China imported Pakistani single carded cotton yarn 8-25S the most which is also the most imported from the world. Pakistani cotton yarn accounted for 26% and it still has upward room. Besides, competiveness of other combed ones and carded ones below 21S will improve. Pakistan cotton yarn output approaches 3.4 million tons and 10% of them are exported to China. In 2018, Pakistan exported 465kt of cotton yarn accounting for nearly 70% in China. On the other hand, purchasing volume from China dominated the exports of Pakistani cotton yarn. The largest competitor of Chinese buyers is local users in Pakistan. As a result, price and downstream orders become the biggest drive apart from policies. In long run, Pakistani cotton yarn imports of China will increase, but hardly return to No.1. Combined with expected price spread, the yearly growth rate may be within 20%, and it is expected to increase in 2020 and 2021.
Appendix: Commodity import origins and export destinations of Pakistan
Commodity import origins of Pakistan
Commodity export destinations of Pakistan