In order to optimize reserved cotton structure and ensure the quality, China released the announcement about state cotton auction in 2021. 

The state cotton auction will start from July 5 and last to September 30, 2021, with the total quantity of about 0.60 million tons. The base selling price will continue to be related with international cotton prices, and the calculation will be showed below.

The base selling price is set at the average price of international cotton and domestic cotton, which will be adjusted every week. During the auction, if the domestic cotton price index declines more than 500yuan/mt in total for consecutive three days, the auction will be suspended next working day, and when the domestic cotton price index does not decline for consecutive three days, the auction will restart the next working day. 

Formula: 

Base selling price (cotton type 3128B)=average price of prior week's domestic cotton prices*50%+average price of prior week's international cotton price*50%. 

1. Domestic cotton price=(China Cotton Index+CNcotton)/2; 

2. International cotton price=Cotlook A Index (converted to USD per ton)*exchange rate*(1+1%import duty)*(1+9%VAT) 

3. The exchange rate is the benchmark exchange rate of the foreign currency against the RMB announced by the People's Bank of China, based on the customs taxation method and the third Wednesday of the previous month (if it is on public holiday, the fourth Wednesday is postponed).