The tense situation in China-Japan relations is being transmitted to the refined cotton trade through three channels: policy, market and logistics, and potential risks are gradually surfacing.

Industry insiders are concerned that if tensions escalate, stricter export reviews may be imposed on refined cotton products with dual-use attributes for both military and civilian purposes. The intensification of policy control and the soaring cost of compliance have raised concerns. Even without explicit prohibitions, "grey measures" such as extended customs clearance procedures and stricter inspection standards have already begun to emerge. For instance, a certain enterprise's wholesale of special refined cotton to Osaka has seen its customs clearance time extended from the previous 3 days to 11 days. The additional storage and port detention fees have swallowed up 10% of its profits.

To avoid the risk of reliance, Japanese chemical giants have initiated the screening of global suppliers, with refined cotton enterprises in the United States, India and Central Asia being the key targets for assessment. Japanese companies are accelerating their "risk reduction" efforts, and the emergence of alternative supply chains is emerging. However, many analysts have pointed out that the production capacity of these regions is only one fifth of that of China, and the purity compliance rate is less than 60%. In the short term, it is difficult to replace the Chinese supply chain, but in the medium and long term, the replacement layout has already posed a threat to the market share of Chinese enterprises.

Fluctuations in logistics settlement and increased trade uncertainties have indirectly affected the logistics efficiency of the China-Japan route due to geopolitical frictions. Some shipping companies have raised the freight rates for related routes by 8% to 12%. Meanwhile, the continuous fluctuations in the Japanese yen exchange rate and the potential changes in the cross-border settlement process have further exacerbated the operational concerns of enterprises.

Facing the pressure of exports to Japan, Chinese refined cotton enterprises have not responded passively. Instead, they have explored ways out from two dimensions: stabilizing orders in the short term and seeking transformation in the medium and long term. Some enterprises have already delivered impressive results.

In the short term, it is still difficult to replace the production capacity scale and cost control ability of China's refined cotton industry, as well as the logistics timeliness advantage brought by the geographical proximity between China and Japan. Nantong Yaohua Fiber and other enterprises have maintained stable cooperation through the strategy of "transparent production + advance declaration" - sharing production progress and quality inspection data with Japanese customers in real time, and at the same time enjoying priority customs clearance services with the help of the AEO advanced certification of the customs, keeping the delivery cycle within 7 days. The orders to Japan have maintained a 5% growth in the first half of this year.

Many enterprises have shifted their focus from primary refined cotton to high-value-added downstream products by extending the industrial chain and doubling the added value. Xinjiang Yuanyi Kechuang, through cooperation with universities, has processed refined cotton into 0.2-millimeter ultra-thin insulating steel paper, which is applied in 5G base stations and new energy vehicle fields. The product value has doubled compared to raw cotton, and the annual sales have exceeded 5 million yuan. This type of cellulose derivative products is mainly for civilian use and is far less affected by geopolitics than primary raw materials, thus becoming a new growth point for exports.

The Belt and Road Initiative has expanded its market, with the growth rate of emerging markets exceeding 80%. Diversified layout has become a particularly effective risk hedging tool. Enterprises in Jiangsu, Xinjiang and other places have been stepping up their efforts to explore the countries along the "Belt and Road". Data from Rudong Customs shows that Nantong Yaohua Fiber's export value to "Belt and Road" countries exceeded 34 million yuan from January to June this year, a year-on-year increase of 82.43%. Xinjiang's refined cotton is sold to the five Central Asian countries via the China-Europe Railway Express. The combined road-rail transport mode has reduced transportation costs by 15% and increased efficiency by 30%.

The China Refined Cotton Association has launched an industry information sharing platform to update trade policies and market trends of various countries in real time. The industry is working in concert to build a solid early warning defense line. At the same time, in collaboration with customs and commerce departments, we provide compliance training for enterprises and promote the establishment of a full-chain service system covering "policy early warning - response guidance - resource connection" to help enterprises avoid trade risks.

The trade fluctuations brought about by the tense relations between China and Japan, although casting a short-term shadow over the export of refined cotton, have also forced the industry to accelerate its farewell to "scale dependence". From the smart planting in Xinjiang cotton fields to the logistics network along the "Belt and Road Initiative", and then to technological breakthroughs in laboratories, China's refined cotton industry is undergoing a transformation from "selling raw materials" to "selling products and technologies". With the accelerated reconstruction of the global industrial chain, this "stress test" may become a new starting point for China's refined cotton industry to move towards high-end and globalization.

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