China is the world's largest cotton producer and consumer. Its domestic cotton demand and supply have a great impact on the world market. Traditionally, cotton production in China was concentrated in the six provinces in the central and northern plains. In the past ten years, Xianjiang's cotton production grew quickly and became the largest cotton producer in China.

Xinjiang province, borders on Gansu and Qinghai provinces to the southeast and the Tibet Autonomous Region to the south, shares a 5,000-km border with eight other countries. It has an area of 1,600,000 sq km (625,000 square miles), which is one-sixth of China's landmass, an area that is four times of the size of California. Xinjiang has a population of more than 16 million. Climate of Xinjiang is between 2,500 to 3,000 hours of sunshine each year. Average mean annual precipitation for the province region averages a mere 150 milliliters (ml). Thus, humidity is quite dry, which is suitable to produce high quality cotton.

The cotton industry occupies its important position in economic development in Xinjiang, due to several factors including advantages of natural resources. The cotton industry has become the “trump card" industry in Xinjiang's economy development. In 2003, Xinjiang's cotton production accounted for 30% of China's total cotton production. From 1994 to 2004, the cotton yield, total output, and quality measurement all ranked No.1 in China.

Cotton has become a major crop and source of income in Xinjiang. Cotton production helps to increase farmer's income, and the standard of living in the rural areas. This led to improved economic development and social stability in Xinjiang. Revenue from cotton and related industries accounts for 1/6 of the GDP in Xinjiang.

In accordance with the region's tenth five-year (2001-2005) development plan, by 2005, Xinjiang's industrial output value from the textile industry will reach 6 billion yuan (US$723 million). Cotton yarn output is expected to increase to 370,000 metric tons. Cotton cloth production will increase to 590 million meters. Cotton export volume will reach 1.8 billion yuan (US$217 million).

The primary objective of this study is to address the importance of Xinjiang cotton production to China and international market, and to evaluate the comparative advantage of cotton production in Xinjiang. The study will help to understand the performance and shift of cotton production in China in the past decades.