MORE than half of Australia's wool is now being processed and manufactured to be worn by Chinese consumers, according to market analyst Chris Wilcox.
While China was buying 75 per cent of the Australian clip, Mr Wilcox said the latest textile data from China indicated that up to 70 per cent was now destined for the Chinese domestic market.
Until recently, the consensus was that at least 50 per cent of China's processed wool was exported as apparel to Europe and North America.
Mr Wilcox, who compiles Landmark's monthly Wool Economic Focus, said that, because of the global financial crisis, China's exports last year fell 14 per cent in terms of volume and 18 per cent in value.
Mr Wilcox said it appeared that, with the assistance of China's economic stimulus, Chinese consumers had been able to take up the drop in re-exports.
However, now it appeared China's attempt to curb this growth by tightening access to finance could be affecting the wool market, according to the Australian Wool Industries Secretariat's Peter Morgan.
Wool sales last week saw AWEX's Eastern Market Indicator close 4c/kg down at 915c/kg.
Prices could have slipped further had it not been for the smaller-than-expected national offering of 43,257 bales and reluctance of producers to sell in a falling market.
The national pass-in rate was a relatively high 12.8 per cent.
This week's offerings of fewer than 40,000 bales should also help steady prices.
But exporter and processor Elders Wool International, in its weekly report, remained slightly more upbeat.
"A good deal of greasy wool stock in China appears to have moved up the supply chain and is now in the form of yarn or fabric," the report said.
"The problem or challenge now is to get it right through to retail."
However, most of the sluggish demand is still in the superfines.
Everton superfine producer Arthur Bennett was in Melbourne last week for the sale of his wool.
One of his lines, of 18.4-micron wool with a high yield of 74 per cent but relatively low staple strength of 18N/kt, sold for 759c/kg greasy.
Mr Bennett was hoping for 780c/kg.
He said superfine Merinos were just about the only livestock that could run in his region.
Mr Bennett, together with the majority of superfine producers, was hoping to see a major lift in prices.
And he agreed the troubles in the Australian Wool Innovation board and the resignation of its chief executive, Brenda McGahan, weren't going to help.
"I suppose you might see more and more producers wondering whether they really need AWI," he said.
