Cotton Price Reform Pilot and Market Regulation: Full Text of the NDRC's Answers to Reporters' Questions

Photo of the press conference.

The National Development and Reform Commission held a press conference on “the cotton target price reform pilot and market regulation” at 9:30 a.m. on Monday, September 22, 2014, in the large conference room on the third floor of the NDRC's secondary building. Relevant responsible officials of the NDRC attended the press conference and answered reporters' questions. The following is the full transcript of the press conference.

Wen Bugao:

Ladies and gentlemen, good morning, and welcome to the National Development and Reform Commission's regular press conference. The theme of today's press conference is the cotton target price reform pilot and market regulation. I have invited two of my colleagues, Deputy Director General Zhou Wangjun of the Price Department and Deputy Director General Liu Xiaonan of the Economic and Trade Department, to brief you on the cotton target price reform pilot work and the specific market regulation situation, and to answer your questions. Below I will briefly introduce the overall situation.

2014-09-22 09:04:16

Wen Bugao:

In the first eight months of this year, China's CPI rose 2.2% year on year, while the PPI fell 1.2% year on year, with the monthly CPI increase ranging between 1.8% and 2.5%. The overall price level has remained basically stable. In response to this situation, the National Development and Reform Commission, in accordance with the arrangements of the Party Central Committee and the State Council, has made full use of the favorable opportunity of a low price level, adopted comprehensive regulation, combined “liberalization”, “management”, “construction” and “reform”, and intensively introduced dozens of major price policies and reform measures, achieving positive results. One major measure was to launch, in accordance with the requirements of the 2014 Central Document No. 1 and the arrangements of the State Council, the pilot work on target price reform for cotton in Xinjiang and for soybeans in Northeast China and Inner Mongolia.

2014-09-22 09:22:37

Wen Bugao:

At present, all policies have been clarified, and the reform pilot work is progressing smoothly. It mainly includes the following four aspects.

First, the target price levels and the reform plan have been released. In early April and late May respectively, the 2014 target prices for cotton and soybeans were announced. The target price levels were 19,800 yuan per ton and 4,800 yuan per ton respectively. In July, the “Cotton Target Price Reform Pilot Plan” was issued, providing guidance for the pilot regions in formulating specific work implementation plans.

Second, a market price monitoring plan has been formulated. In July, our commission, together with relevant departments, studied and formulated the “Implementation Plan for Market Price Monitoring of Cotton in Xinjiang”, clarifying the price monitoring indicators and specific division of tasks. Starting from September 1, the market price monitoring work for cotton in Xinjiang has been officially launched.

Third, the specific implementation plan for Xinjiang has been approved. With the approval of the State Council, last week our commission approved the “Implementation Plan for the Cotton Target Price Reform Pilot Work” of the Xinjiang Autonomous Region and the Xinjiang Production and Construction Corps. The Xinjiang Autonomous Region and the Corps have also determined different subsidy distribution methods in light of their own actual conditions. The specific contents of the plans will be published to society as soon as possible by the Xinjiang Autonomous Region and the Xinjiang Production and Construction Corps.

2014-09-22 09:25:57

Wen Bugao:

Fourth, regulatory measures for the cotton market in the new year have been studied and proposed.

Implementing the target price system is a major institutional innovation for improving China's agricultural products price and market regulation mechanism. Since the launch of the pilot, the cotton planting area in Xinjiang has been relatively stable, the price gap between domestic and international cotton and soybean markets has been gradually narrowing, and corporate confidence and market vitality have also been gradually strengthening. Judging from the domestic and international cotton price gap in the new year, it is expected to narrow to a reasonable range, which will help curb substitution by chemical fibers and reduce imports of cotton yarn. Domestic cotton demand is expected to stabilize and rebound. Next, our commission will, together with relevant departments, promptly summarize the experience of the reform pilot, improve relevant policy measures, and comprehensively adopt measures such as import and export and reserve adjustment to do a good job in market regulation, maintain smooth market operation, and create a favorable market environment for the target price reform pilot.

That is a brief introduction to the overall situation. Now I would like to invite the reporters present to ask questions. When asking questions, please state the media outlet you represent.

2014-09-22 09:29:33

Reporter from a news agency:

What are the trends in cotton production areas and prices internationally and domestically this year?

2014-09-22 09:31:00

Zhou Wangjun:

First, on behalf of the Price Department of the National Development and Reform Commission, I thank all our old and new friends for their long-term concern and support for our price work. Over these years we have cooperated very well, which has been very helpful to our country's price work. This year's international and domestic cotton price trends can be divided into two aspects: first, the domestic aspect. New cotton in Xinjiang has already begun to come onto the market. The market price we monitor for seed cotton, which is before ginning, is currently 3.3 yuan per jin. There are quality differences, with good and poor quality, and not every lot sells for 3.3 yuan. Converted into lint cotton, the price is more than 14,000 yuan per ton. This is the current domestic situation. Second, the international aspect. Last week, the lint cotton price on the U.S. futures market was 11,800 yuan. There is still a certain price gap between domestic and international lint cotton prices. As for the next trend, we preliminarily expect it will be relatively stable. International market cotton prices may not fall substantially again, and domestic cotton prices may also stabilize at the current level, or fluctuate around the current level of 3.3 yuan and 14,000 yuan.

2014-09-22 09:31:20

Reporter from Economic Daily:

My question concerns cotton price subsidies. Will the subsidy be given only this year, or will it continue in the years ahead? Through what channels can cotton price subsidies be distributed to cotton farmers?

2014-09-22 09:33:54

Zhou Wangjun:

Regarding the subsidy to cotton farmers under the target price system, we must first explain the mechanism by which the target price operates; the subsidy is the final form of expression. What is the mechanism of the target price we are dealing with? Fundamentally, the cotton price must be determined by the market. In this process, we determine a target price based on farmers' planting costs plus basic returns. In accordance with this principle, we set this year's Xinjiang cotton target price at 19,800 yuan per ton. The current domestic cotton price is 14,000 yuan. The difference between 19,800 and 14,000, which is 5,800 yuan per ton, is the amount we should subsidize farmers with this year. Of course, whether the final market price is 14,000 yuan or 15,000 yuan, we must calculate the actual price based on the average price over the three months of September, October and November when farmers sell their cotton. The gap between the target price and the actual price is the subsidy amount we should distribute to farmers. Only after explaining this can we return to your question. As for whether this subsidy is given every year, when the market price is lower than the target price, the difference is given to farmers; when the market price is higher than the target price, the state does not issue a subsidy. This is the important difference between the target price system we now implement and the previous temporary purchase and storage policy.