China cotton stocks rise on hopes of higher import quotas (China)

Cotton stored at Chinese bonded warehouses has risen to as much as a million tonnes after merchants stocked up with cheaper overseas supplies in anticipation of Beijing raising import quotas, trade sources and analysts said on Thursday.

China, the world's top cotton buyer, may issue a new batch of quotas for as much as 1.5 million tonnes by May to help textile mills secure cheaper cotton overseas, since Indian supplies are currently about 15 percent cheaper than domestic cotton, they said.

Expectations of higher imports have helped push down China's cotton futures on the Zhengzhou Commodity Exchange, with the most-active September contract down over one percent so far this week and on track for its worst weekly loss in five weeks.

"There is a large volume of cotton stockpiled at bonded warehouses and textile mills have been pushing the government to issue more import quotas," said Dong Shuzhi, director of the cotton department at Founder Commodities Group, a Chinese trading house.

"There are now growing expectations from the market that Beijing will agree to issue more quotas."

Despite lacklustre demand at home, China's cotton prices are now the most expensive in the world at over 20,000 yuan ($3,200) a tonne, thanks to Beijing's deliberate stockpiling campaign aimed at shoring up prices.

The buying blitz, which began in September and lasted for six months, saw the government sweeping up 3.13 million tonnes of cotton - nearly half of the country's 2011 harvest.

Cotton stocks at bonded warehouses - which allow goods that have arrived in China to delay the assessment of a 17 percent value-added tax - are hovering at between 500,000 and one million tonnes, according to industry estimates.