The 2019 CNCE Cotton Industry Development Annual Conference will be held in Beijing on March 22. The theme of the conference is "New Era, New Cotton Industry, New Opportunities." Topics will cover various aspects, including the long-term impact of the US-China trade friction on China's cotton industry, 20 years of reform in China's cotton industry, and discussions on business strategies for cotton-related enterprises. Over the past two decades, China's cotton industry has undergone tremendous changes. The fact that Henan Tongzhou Cotton has remained strong and continues to thrive amidst a harsh market environment and industry reshuffle speaks volumes about its unique approach. Recently, I conducted an exclusive interview with Mr. Wei Gangmin, Chairman and leader of Tongzhou Cotton.
Cotton Outlook: How do you view the changes and development of China's cotton industry over the past two decades?
Wei Gangmin The transformation and development of China's cotton industry over the past two decades has been closely intertwined with China's reform and opening up, and the continuous improvement of China's socialist market economy; it has also matured step by step with the changing market demands. Twenty years ago, cotton purchase and sales prices were set by the state; now, they are completely market-driven. Eighteen years ago, the main operators in the cotton industry were limited to supply and marketing cooperatives, seed companies, and state-owned farms; now, after certification, various domestic enterprises can participate in cotton operations. Fifteen years ago, factory inspections were the main method for cotton quality inspection; now, fiber inspection institutions have implemented package-by-package inspection of cotton in storage. National policy regulation is also more market-oriented. In 2014, the Xinjiang target price subsidy policy replaced the reserve policy to guarantee farmers' income, and in 2016, the domestically and internationally linked reserve pricing mechanism replaced the previous fixed-price reserve system.
Looking back at each reform of cotton industry policies, they have all moved towards greater standardization, flexibility, and productivity. As long as the direction of deepening market-oriented reforms remains unchanged, I believe that the transformation of the cotton industry will further promote the upgrading of the entire cotton textile industry chain, achieving optimal balance between domestic and international markets, upstream and downstream industries, and competing varieties.
Cotton Outlook: As a leader of an excellent cotton-related enterprise, how have you led your company to grow step by step? Could you share your experience of success?
Wei Gangmin Tongzhou Cotton has also grown continuously along with the transformation and development of China's cotton industry. I wouldn't say we have a specific formula for success, but the reason Tongzhou Cotton has been able to "survive" and maintain a position in the harsh market environment and industry reshuffle, I believe, boils down to three key points:
1. Following market trends. Tongzhou Cotton's development has witnessed every step of the reform of the cotton circulation system. It is precisely by taking advantage of policy tailwinds that Tongzhou Cotton has achieved its current success. Adapting to market trends and strengthening research on market trends are crucial for a company's development. Every year, we invest a significant amount of manpower, financial resources, and time in researching cotton price patterns and trends. Thorough market research is a prerequisite for successfully managing our spot business.
2. Meeting customers' differentiated needs. Keeping up with changes in customer needs and providing customers with suitable and cost-effective cotton is the key to our spot trading. We prioritize customer needs, take responsibility for our customers, and provide excellent customer service.
3. Innovating spot trading models. In recent years, Tongzhou Cotton has been a pioneer and leader in promoting "basis trading and price fixing models" in the cotton industry. This is essentially an innovation of the traditional trading model, and it is also a natural result of keeping up with the times.
Cotton Outlook: How do you view the US-China trade friction? What is its impact on China's cotton industry?
Wei Gangmin On the surface, the US-China trade friction is a trade war initiated by the United States last year on the pretext of trade imbalance; essentially, it is a strategic game between two major powers. Negotiation is a common pursuit of the interests of both China and the United States.
The US-China trade war has a huge impact on the cotton industry. Whether the US-China trade relationship deteriorates or remains uncertain, it will suppress consumption in China's downstream textile and apparel industries, affecting the international competitiveness of Chinese enterprises and domestic cotton consumption. If a deal is reached, the suppressed demand downstream may be released again. China's purchase of US agricultural products is an important part of the US-China trade negotiations, and cotton is also on the procurement list. Once the US-China trade relationship is resolved, China's cancellation of additional tariffs or the targeted reserve of US cotton will have a significant impact on global cotton supply and international cotton trade.
Cotton Outlook: What is your view on the risks and opportunities in the 2019 cotton market? What are the corresponding strategies?
Wei Gangmin Trading cotton in 2019 will be very difficult. All the risks and opportunities stem from uncertainty: uncertainty in US-China trade relations, uncertainty in industrial control policies, and the inherent weather uncertainty common to agricultural products. In the face of so much uncertainty, we need to focus on relatively certain things, keep up with market changes, and reduce business risks.
Cotton Outlook: On the 20th anniversary of the establishment of the trading market, what would you most like to express?
Wei Gangmin Happy birthday to the National Cotton Trading Market! May it continue to prosper! At 20, full of vigor; at 100, flourishing!
Tongzhou Cotton is willing to work with the trading market to contribute to the development of China's cotton industry!
