The Transmission Effect Test of China’s Rotation Mechanism on the Cotton Reserve Market

Xiaoxiao Li, Bo Wang, Lingyan Sun, Honghui Zhu, Ning Lv and Jiaqi Zhang ()
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Xiaoxiao Li: College of Economics and Management, China Agricultural University, Beijing 100083, China
Bo Wang: College of Economics and Management, Shihezi University, Shihezi 832003, China
Lingyan Sun: College of Economics and Management, Shihezi University, Shihezi 832003, China
Honghui Zhu: College of Economics and Management, Shihezi University, Shihezi 832003, China
Ning Lv: College of Economics and Management, Shihezi University, Shihezi 832003, China
Jiaqi Zhang: College of Economics and Management, Shihezi University, Shihezi 832003, China

Sustainability, 2023, vol. 15, issue 5, 1-17

Abstract: As an important strategic material in China, cotton policy has positive significance in stabilizing the safety of domestic cotton, ensuring cotton income, and stabilizing cotton output. At the same time, affected by the future market price, the cotton industry supply chain cost management is particularly important. Based on the data of China’s cotton price, consumption, yield, and wheeling-in and wheeling-out from 1978 to 2016, the simultaneous equation model is used to empirically analyze the transmission effect of the rotation mechanism of reserve cotton (RMRC) on cotton supply and demand. Studies have shown that China’s cotton reserve policy and the RMRC play a positive role in balancing the supply and demand of the domestic cotton market and preventing excessive fluctuations in cotton prices. The transmission effect of the RMRC on domestic cotton yield and consumption is significant and there are certain differences. The transmission effect of domestic cotton yield is stronger than the transmission effect on domestic cotton consumption. The difference is owing to the transfer path of the RMRC being different. We should improve the regulation and control effect of the RMRC on cotton demand, realize the normalization of the RMRC, and clarify the policy objectives of the RMRC.

Keywords: rotation mechanism on the cotton reserve market (RMRC); transmission effect; simultaneous equation; supply chain (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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