Despite US sanctions on Xinjiang cotton, China’s textile industry weathers the storm
Dozens of firms that source from the region were added to a US import blacklist, but few appear worried after years of diversification
When the US government announced the addition of 43 Chinese companies to an import blacklist in late July over allegations of forced labour in the country’s western Xinjiang Uygur autonomous region – including several household food and apparel brands – the local reaction to the news was surprisingly calm.
“It felt like a sudden batch of companies was added out of nowhere … but it shouldn’t have much of an impact on the sector,” said the owner of a cotton-ginning mill in southern Xinjiang, who spoke on condition of anonymity.
This was a far cry from the panic triggered four years ago, when Xinjiang cotton became a geopolitical flashpoint between Washington and Beijing.
“At least for Xinjiang cotton, I feel the industry has weathered the storm,” he said. Now, the local processing rates of cotton products are “remarkably high” – around 30 to 40 per cent – and development across the entire cotton textile supply chain is booming, he added.
“From spinning and weaving to printing and dyeing, companies are steadily expanding their scale,” the mill owner said.
His change in attitude might also be a snapshot for a broader change in the global political landscape. After significant export diversification efforts and a shift in the balance of power between China and the US – especially since last year’s sweeping trade war – Chinese industries seem to be reacting to US sanctions with greater resilience and confidence.
However, analysts and industry insiders said this was no time to relax. Despite the goodwill generated by the summits held or planned between the two countries’ leaders this year, they said the risks for Chinese firms were only bound to increase amid lingering bilateral tensions.
Its most significant impact has been reshaping how US fashion companies manage sourcing, compliance, and supply chain transparencySheng Lu, University of Delaware
The US broadens its list
Passed by the US Congress and signed into law in 2021, the UFLPA establishes a “rebuttable presumption” that all goods from the region involve forced labour – a charge Beijing consistently denies – and specifically bars listed companies from exporting their goods to the US unless they can provide clear and convincing evidence to the contrary.
The latest additions to the list, which took effect on August 3, represent an expansion of 30 per cent – the largest single increase in the list’s history – bringing the total number of companies to 187. Sectors covered include gold, pharmaceuticals, aluminium, garments and food, according to the US Department of Homeland Security (DHS).
A few industry leaders in the cotton, textile and apparel sector in China were included on the list, including Henan Tongzhou Cotton and Fujian Septwolves.
Septwolves said the company was “shocked and saddened” by its inclusion on the list, and that the company’s core business was focused on the domestic market, so its operations would be unaffected. Tongzhou Cotton has not replied to requests for comment from the South China Morning Post.
The country’s National Textile and Apparel Council also issued a statement saying that there was “no ‘forced labour’ of any kind” in Xinjiang’s cotton and textile sector, adding that cultivation and harvesting were largely automated, with over 90 per cent of the region’s cotton harvested by machine.
“The US action gravely damages the order and stable operation of global textile supply chains,” the council said. “Xinjiang produces approximately one-fifth of the world’s cotton, and China accounts for nearly one-third of global textile and apparel exports.”
According to figures from China’s National Bureau of Statistics, the region produced 6.17 million tonnes of cotton in 2024, up 20.2 per cent from the 5.13 million tonnes recorded in 2021, the year the UFLPA was approved.
In its statement, the textile council called upon international apparel brands to “respect the facts” regarding Xinjiang’s development, cautioning them to “keep commercial operations from being coerced by politics, and avoid becoming tools of anti-China forces in the US.”
Re-sourcing textile resources
Years after taking effect, the UFLPA had yet to cause an immediate or complete decoupling of the US-China textile and apparel trade, said Sheng Lu, a professor in the department of fashion and apparel studies at the University of Delaware. China is still regarded as indispensable for textile raw material sourcing among US importers, he added.
“The impact of the UFLPA has been more nuanced than many initially expected,” Lu said. “Instead, its most significant impact has been reshaping how US fashion companies manage sourcing, compliance, and supply chain transparency.”
According to US Department of Commerce data, in value terms only 6.4 per cent of US cotton apparel came from China during the first five months of 2026, down from 9.9 per cent a year earlier and 21.9 per cent in 2019, marking another record low, Lu said.
That said, Lu added he did not expect the latest expansion of the UFLPA entity list would trigger another mass relocation of apparel sourcing.
“Many leading US fashion companies reported sourcing only a single-digit share of their total apparel volume or value from China and appear to have already reached their desired level of exposure to China,” he said.
“Rather than continuing to accelerate their exit from China, these companies are increasingly focused on optimising their broader sourcing portfolios while maintaining limited sourcing from China, which continues to offer strong manufacturing advantages in areas such as small minimum order quantity, flexibility and agility, and vertical integration.”
China’s industry adapts
A general consensus among Chinese textile exporters is that a workaround for dealing with the UFLPA has been gradually established: use foreign cotton when traceability is required, and Xinjiang cotton otherwise.
Some industry insiders said most traceability only existed on paper, leaving an ample grey area in which to manoeuvre.
One sales manager at a major textile manufacturer in eastern China said the UFLPA had been like a hammer hanging over the company’s head, but there was never a clear timeline as to when strict enforcement of the policy would actually begin.
It was a big headache for the company, which exports sofa covers to the US, when the policy was first implemented in 2022, the manager said, adding that some downstream clients began to ask for traceability documents for the raw materials, having to prove that their products did not use Xinjiang cotton.
But all of the company’s products were made with cotton from the region, the manager said, attesting to the material’s quality. His American clients tended to steer clear of products containing cotton, because “they don’t want to get mixed up in politics,” he added.
“So, we try to avoid promoting cotton goods and focus on other fabrics instead.”
Fang Huiling, senior analyst at Shanghai-based Orient Futures, said field surveys across Xinjiang and other provinces showed that Chinese cotton growers had found ways to circumvent the US sanctions by diversifying export destinations and separating production lines for export and domestic markets.
“After years of sustained sanctions by the US, domestic companies have become accustomed to the situation and built greater resilience. That’s why I believe the impact [of the latest UFLPA sanctions] on China is limited,” Fang said.
I honestly feel like this is the toughest year of my 11-year career in the industryHua, textile factory owner
Instead, they might even inflict greater pain on US cotton growers than those in Xinjiang, Fang said. American agricultural products were easy targets for Beijing during trade tensions with Washington, she said, adding that as one of its countermeasures during last year’s trade war, China imposed an additional 15 per cent tariff on US cotton.
“China is the world’s largest textile producer and was once the top purchaser of US cotton,” Fang said. “Chinese buyers have gradually diverted their purchases away from the US towards countries like Brazil, weighing heavily on American cotton growers.”
However, not all industry insiders were so optimistic.
“Imported cotton is more expensive – sourcing from places like Brazil or Myanmar costs about 2,000 yuan (US$297) more per tonne once you factor in shipping, customs clearance, and other fees,” said Hua, who owns a textile factory in eastern China’s Zhejiang province that mainly serves overseas clients, adding this difference included the costs incurred from preparing and providing traceability information to the US.
“But it’s not just a matter of price; the main issue is quality,” said Hua, who preferred to go by a surname. “Imported cotton has higher defect rates than Xinjiang cotton.”
While costs have gone up, Hua’s American clients were not accepting price increases, he said, adding the appreciation of the yuan continued to squeeze his profit margins.
“I honestly feel like this is the toughest year of my 11-year career in the industry.”
In tall cotton – for now
But even with the ups and downs of the US-China relationship, which have affected the enforcement of certain trade measures more generally, making sure that UFLPA is being complied with has always been patchy, according to Nick Marro, global trade lead at the Economist Intelligence Unit.
“This could reflect a lack of expertise or personnel on the US Customs side, but also a lack of very strict guidance coming from the policymakers themselves,” Marro said.
But Hua said he would not dare test the leniency of US law enforcement, since getting caught would mean substantial fines and the seizure and eventual forfeiture of the entire shipment.
More than 24,300 shipments with a total value of almost US$1 billion had been blocked since the act came into force, according to DHS.
“Everyone fears that the ban on Xinjiang cotton is just the beginning – what we’re all really worried about is whether the US might eventually impose a complete ban on textile exports down the road,” Hua said.
For the sofa cover exporter in eastern China, orders from the US have been resilient this year – a relief after last year’s tit-for-tat tariff war that once brought bilateral trade to a near standstill.
“Unless some unforeseen policies come out, things generally look fairly optimistic for now,” the manager said.
But manufacturers in Xinjiang have long ceased pinning their hopes on the mercy of the US.
“The Chinese government should just move the headquarters for all those must-have goods the US relies on China for to Xinjiang,” the cotton mill owner said. “That way, if you want to buy them, you have to buy from Xinjiang.”
As an example, he cited rare earth elements – the valuable minerals crucial to hi-tech and defence supply chains.