By Horio Munemasa and Funaki Ayaka
Chinese cotton manufacturers are rushing to participate in bids to buy the Chinese government’s cotton stockpiles. Because the U.S. and European countries are increasingly avoiding cotton from the Xinjiang Uyghur Autonomous Region, which is suspected of being produced by forced labor, this year’s bidding was expected to be slow. Demand [for cotton] seems to be recovering with the recovering economy. There is concern, however, that Chinese companies will buy the cotton to illegally export it to Southeast Asia. Japanese, U.S., and European apparel companies are concerned about such cotton finding its way into their products.
Upon hearing that Chinese cotton manufacturers are vigorously buying up cotton offered by China, a person responsible [for cotton] in a Japanese trading company expressed concern, saying, “The cotton is selling out every day. What will [the buyers] use [the cotton] for?” Prior to the start of bidding, it was expected that “demand would be sluggish in 2021.”
This is because most cotton up for bidding is “Xinjiang cotton” produced in the Xinjiang Uyghur Autonomous Region. The U.S. and Europe are increasingly avoiding the use of such cotton, because it is suspected of being produced through the Chinese authorities’ use of forced labor for tasks such as harvesting cotton. The U.S. banned imports of products that use Xinjiang cotton in January 2021. In May 2021, the U.S. customs blocked imports of products by Uniqlo, a company affiliated with Fast Retailing, on suspicion that a Xinjiang organization was involved in production. Gunze, Hennes & Mauritz (H&M), and Nike have already stopped using Xinjiang cotton. There is surprise in the market over the lively bidding in China amid these moves.
The use of Xinjiang cotton purchased by Chinese cotton manufacturers is a point of concern. Although cotton consumed in China will not create a big issue, there is a possibility that such cotton will be “smuggled out” to Southeast Asia at a lower price, without going through customs.
“It is very difficult to completely ascertain the origins” of such products as cotton yarn or fabric produced from smuggled Xinjiang cotton, according to a major apparel company. A specialized trading company comments that “there is risk that such cotton will be cleansed of its origin and used for apparel items.” Products labeled as using high-quality cotton of “another country” may use Xinjiang cotton. (Abridged)