Comparative Study On Hedging Effectiveness Of Cotton Futures Between China And America

China is the largest producer of cotton textiles in the world and has a huge demand for raw material cotton.In the early 1970 s,China had been the largest consumer of cotton production in the world.Since of the influence of planned economy policy,cotton prices had been in a state of non-market.The fluctuation of yield is big,making the cost of using cotton textile rise sharply.Since joining the WTO in 2001,China's textile and garment industry has developed rapidly,and the price of cotton has become an important factor restricting the profitability of cotton textile enterprises.Futures market hedging function can effectively circumvent the risk of price fluctuation in the corresponding goods.To provide the Chinese cotton textile enterprise with ways to circumvent the risk of cotton price fluctuations,China in 2004 set up cotton futures in Zhengzhou Commodity Exchange,since the future is young,the imperfection of the system and the market are immature.The United States established the cotton futures market as early as 1870,which has been very well developed to date and has played a huge positive role in regulating the spot market of cotton.In addition,U.S.cotton futures prices have become the most powerful voice in the world.With the increasing volume of cotton and cotton futures in China,the price of China's cotton futures has become more and more important in the international market.In the process of internationalization,China needs to draw lessons from American cotton futures market development experience to perfect itself,thus provide a more efficient for cotton textile enterprises to avoid cotton price volatility risk in China's cotton futures market.This paper analyzes the similarities and differences of the origin and development of cotton futures market in China and the United States.On this basis,this paper use the data and ECM model to calculate the hedging ratio and the hedging performance in United States and China cotton futures market.According to the research,China's cotton futures market has a guaranteed performance of around 20.7%,and the U.S.is around 72.13%.Clearly,the hedging effect of the U.S.cotton futures market is stronger than that of China's cotton futures market.Finally,through the analysis of causes of cotton futures market efficiency difference between China and the United States,this paper puts forward the relevant policy recommendations,in order to promote the perfection of China's cotton futures market and the improvement of hedging performance,to provide a perfect platform for cotton textile enterprises to evade risk of price fluctuations.