Chinese Synthetic Fiber Capacity and its Impacts on Natural Fiber Markets
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Chinese synthetic fiber capacity is more than 100 times larger than it was just 30 years ago. It represents more capacity than exists in the United States and Western Europe combined and continues to expand each year to serve the growing Chinese textile industry. Historically, the Chinese government has provided support to the synthetic fiber industry and encouraged its expansion. At the same time, petroleum consumption in China continues to expand, and China is now the second largest petroleum consumer in the world. As a byproduct of petroleum distillation, the feeder materials for synthetic fiber production are readily available in the marketplace. In the presence of inter-fiber competition, the large amount of synthetic production capacity may have consequences for world cotton consumption and prices. With changes in Chinese government support to the synthetic fiber industry or other changes in the demand for synthetic capacity, there is the potential for indirect consequences on cotton fiber markets. Using a structural economic model of inter-fiber competition, such impacts are investigated.