The Fall of Chinese Cotton Consumption
- Diego Miranda
- Sep 23
- 4 min read
China's economic slowdown has finally reached the cotton sector: this year, China imported only 2.4 million bales of cotton (Jan-Jul), representing a 60% drop compared to the three-year average. In this blog, we explore the fall of China's cotton demand.
Whenever we are talking about cotton, the one thing we cannot leave out of the conversation is China. The Eastern country represents over a quarter of the world’s production and an even bigger share of consumption. Whatever happens there, whether regarding supply or demand, will reverberate throughout the cotton markets across the entire globe. As the reader of this blog might imagine, something is happening, specifically regarding Chinese demand for cotton.
Recently, China has given strong signs that its economy is slowing down, which has been supported by most economic data. Real GDP expanded 5.2% YoY in Q2. Although such growth would be enviable for most nations, it is considerably below what we saw before the pandemic, when it was normal for the Chinese economy to grow by double digits every year. Since the pandemic, China has been unable to show the same dynamism it had in the past. Other statistics, such as industrial activity and retail sales, suggest a similar trend.
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An even worse scenario can be seen when we consider consumer prices. Since 2023, China has dealt with persistent deflation, with prices falling almost 0.8% YoY in the worst months. Although a recovery seemed likely in 2024, it did not persist, and this year the CPI resumed showing negative numbers. Between January and August 2025, only two months showed price increases YoY.
The PPI presents similar readings, suggesting weakness in industrial demand. The Chinese government sees deflation as a sign of low consumption and has attempted to address the issue by reducing interest rates and increasing credit. Such measures, however, have shown little effect in reversing the negative activity and price trends.
The economic slowdown has not limited itself to indicators alone; it has also been reflected in actual markets, especially in the real estate sector. Throughout 2024, we saw the collapse of some of China’s biggest property developers, such as Evergrande and Country Garden. The real estate market has shrunk as a share of GDP, and mortgage boycotts tied to delayed or substandard completions of housing projects skyrocketed.
Unlike previous years, however, it seems the economic slowdown has finally reached the cotton sector. Total imports in 2025 were 2.4 million bales between January and July, representing a 60% drop compared to the three-year average. For the marketing year just ended (2024/25), China’s cotton imports were around 5.0 million bales, the lowest in nearly a decade.
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Some people might argue that weak imports reflect a particularly good crop, but that would be a mistake. Currently, the USDA projects China’s cotton production in 2025/26 at 32.5 million bales, marginally above the 32.0 million from the previous season. The difference is negligible and would not be able to justify the drastic fall in import numbers.
Instead, the weak cotton consumption reflects the slowdown of the Chinese textile sector. In the first half of 2025, apparel enterprises above the designated size recorded a 0.4% YoY decline in industrial added value, while overall output managed to edge up by only 0.4%. At the same time, the sector’s operating income fell by 1.4% and profits contracted sharply by nearly 13%, underscoring the squeeze on margins and demand. On the consumer side, retail sales of clothing grew by just 2.5% YoY in January–June, another poor number by Chinese standards.
With the 2024/25 season over, we are starting to see the first indicators of what we can expect for the upcoming season, and the outlook is not positive. Fresh August data keep the macro tone subdued, with industrial production at its lowest point in a year. The 0.0% CPI also does not help.
To make things worse, policy changes have further restricted the potential recovery in demand. On August 25, Beijing limited the use of the sliding-scale cotton import quota strictly to processing trade, with short validity windows. This effectively caps discretionary imports and raises the cost of foreign cotton, undermining the possibility that lower global prices could stimulate buying. In practice, the new rule means mills cannot freely access cheaper international supplies to rebuild stocks or hedge against domestic volatility.
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Although the last months of the 2024/25 season were already bad, looking ahead, we might have an even worse beginning for cotton consumption in 2025/26. The combination of weak economic indicators and stricter restrictions all point toward a reduction in China’s domestic use, which is most likely to be reflected in weak imports, as has happened in the last few months. With China as the largest giant of the cotton industry, such weak demand would cause shocks throughout the entire globe.
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