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Recently I often looked back the silk demand-supply and production-distribution situation that occurred in the first half of 1994 when raw silk price rose to 240000 Yuan per ton. Data from China Customs, total silk exports in 1993 and 1994 reached 3.017 billion US dollars and 3.275 billion US dollars respectively, Meanwhile, 2003 and 2004 Raw silk export price averaged 23900 US dollars and 23400 US dollars respectively. According to calculation, total net silk consumption for exports (short fiber excluded) stood at 72500 ton through 1993 and 71000 ton through 1994. Meanwhile, cocoon output in 1993 and 1994 reached 620000 ton and 67000 ton respectively. Mulberry silk yarn output totaled 87800 ton in 1994. In fact, some problems and conflict have been hidden inside these significant figures. In 1994 when the supply was 50 per cent lower than the demand and silk price hiked sharply, the new situation that demand in domestic and global markets began weak was maturing.

Just as expected, the industry situation took a sudden turn in 1995. The export volume and value decreased 17 per cent and 24 per cent respectively and the cocoon output still stood at 670000 ton. The downward trend continued six years. In 1999, silk exports decreased to 1.691 billion US dollars and total net silk consumption for exports (short fiber excluded) reached 31900 ton. The national cocoon output remained between 450000 and 500000 ton consecutively. Mulberry silk yarn output decreased to 51300 ton in 2000. At the meantime, the export prices remained at lower levels. The silk industry faced worst crisis.

Not to mention, we don’t want the industry to be in great sorrow resulted from extreme joy. However, we cannot escape history that is worth studying for reference.

Cocoon and silk supply showed tight from the second half of 2003. Conflict between supply and demand deepened, and then sped up through the first half of this year. Price broke the record of five years. On the other hand, economic rules tell us that the continuous growth of silk price will inevitably result in stimulating production and curbing consumption. You know, from the view of macro level as well as the micro level, the economic situation at the moment is different greatly from ten years ago. Market economy is much improved. Market mechanism is promoted. However, as a person who served for the industry and had great feeling about the industry, I hope the industry veterans to be calm, sensible and wise to analysis the current and forward situation in order to avoid extreme ups and downs.

First, the possibility of increasing autumn cocoon output is little. The above-said unfavorable factors still had much chance to exist or occur in various regions. It’s evident that the situation of autumn cocoon production this year will have great impact on the silk industry within the late of this year and next year.

Secondary, limits on imports of Chinese clothing from the UN and the USA and anti-dumping duties imposed by India are like a double-edged- it cuts both ways. However, we should express more concern on the unfavorable impact on the silk industry. Nobody can guarantee textiles restriction will not be a dealt block to silk exports as the situation changes. It requires us to adjust ourselves ahead of time. Furthermore, we should face the fact that sino-India silk trading is essential to both sides. But we shall encounter the unfavorable impact on silk S-D in short term if anti-dumping taxes on Chinese silk fabric are levied.

Thirdly, China’s exchange rate reform has some impact on textile industry, especially on silk industry most consisting of medium and small enterprises with general trading measures and low profits.

Lastly, demand in global silk market grows stably but not rapidly in general. We can’t elimilate the possibility that silk exports will slow down in the second half of this year.

In conclusion, I must point out that silk products are finally controlled by the function of economic rules and value rules. Matured economy market can allocate resources through the price mechanism. The raw silk reserved system implemented by the state government has been a good result during recent years. I wish the system to be created more scientifically, timely and efficiently for the silk industry growing steadily, suitably, and healthily.