The heady growth in Vietnam's textiles industry, expected to export $28bn this year, is to take its cotton imports close to those of top-ranked China – whose crop subsidy reforms are not playing out as forecast.

The US Department of Agriculture's Hanoi bureau hiked to a record 5.37m bales (1.17m tonnes) its forecast for Vietnam's cotton imports in 2015-16.

The figure, representing an increase of more than 1m bales year on year, is some 520,000 bales above the USDA's official forecast, although this is up for revision later on Wednesday.

And it would put Vietnam, which a decade ago was importing fewer than 700,000 bales of cotton a year, with Bangladesh and China in the club importing more than 5m bales of the fibre a year.

'Great increase in demand'

The upgrade reflects Vietnamese consumption which "continues to increase in order to meet strong demand from its expanding textile industry", the bureau said in a report.

In the yarn sector, the number of spindles reached 6.3m as of last season, up 24% in three years - with a further 30% spurt to 8.2m spindles expected by 2016-17.

The increase will "cause a great increase in demand for cotton", the briefing said.

And the yarn is going to meet "strong" demand both from domestic textiles and garment makers - which have enjoyed inward investment of some $2bn in the first 10 months of this year from the likes of Hong Kong, South Korea and Turkey – and buyers abroad.

China rethink

Foreign demand for yarn is particularly strong in China, to where Vietnam exported 370,200 tonnes including synthetics in the first nine months of 2015 - a rise of 34% year on year and accounting for 52% of overall shipments.

This is despite the reform of China's cotton subsidy programme which, in offering farmers a price far above global market rates, encouraged spinners to import in particular yarn, which is not subject to the same import restrictions as cotton itself.

China's "constantly high" cotton price despite the subsidy revamp – with the best-traded May contract on the Dalian exchange trading at 11,465 renminbi a tonne on Tuesday, equivalent to 81 cents a pound – "has significantly reduced" the competitiveness of its own yarn producers.

Indeed, the bureau acknowledged that "contrary to [our] previous forecast toward China's reform… China's textile and apparel industry likely favours the use of imported yarn for the time being".

The bureau highlighted restrictions still on Chinese imports of cotton itself, with buyers needing to purchase the fibre from the country's huge reserves to gain the right to purchase imported supplies.

'Great opportunities'

China's continued demand for yarn "has created great opportunities in Vietnam's growing spinning industry", the bureau said.

It forecast Vietnam's yarn exports hitting a record 950,000 tonnes in calendar 2015, up 10.7% year on year, the bureau said.

The Trans-Pacific Partnership trade deal, and a free trade agreement with the European Union, will also, in booting Vietnam's own textiles industry, boost the country's demand for cotton.

And with the country's own farmers preferring coffee, corn and cashews, and showing little enthusiasm for cotton, of which they produce some 3,000 bales a year, Vietnam will need to turn to imports for supplies.

These come mainly from the US, with Vietnam's purchases from the world's top cotton exporter soaring 120% to 377,300 tonnes in first nine months of the year.