China is forced to launch a new cotton subsidy policy this year, to subsidize low-income groups and farmers through price fluctuations. The excessive amount of imported has reached 4 million tonnes along with the stockpiles which China started over the past three years to stabilize prices, after cotton prices fluctuated spectacularly between 2010 and 2011. The China's current cotton reserve policy has upset domestic cotton prices.

The prices set for cotton by government have surged to a level much higher than international cotton prices even after the reserved cotton was released into the market resulting into limited profits by the Chinese cotton spinning industry due to high costs.

According to Chen Xiwen, a member of the Chinese People's Political Consultative Conference, under the new policy the government will subsidize low-income consumers whenever a produce's market price exceeds below government-set prices. The government will subsidize farmers when the market prices drop below government-set prices. The new policy details will be revealed soon as the round of cotton stockpiling this year is almost over.

The government has also decided to conduct a pilot scheme for the new policy which is likely to begin in the northwestern region of Xinjiang, one of the country's main cotton production bases.