SYDNEY (REUTERS) - Australia is seeking to boost demand for its cotton from countries such as Vietnam as tensions with China threaten to leave Canberra with large stockpiles, sources familiar with the plan said on Thursday (Dec 10).

In October, Chinese cotton mills were ordered to stop buying Australian cotton, threatening a trade worth about A$900 million (S$899 million) amid escalating tensions between the two countries.

Australian producers didn't immediately feel the impact, however, as their country had little stocks to sell after a sustained drought led to record low production.

But since then, rains soaked Australia's east coast, and the country's growers are on course to produce 506,000 tones of cotton - the highest since 2018 - leaving exporters scrambling to find alternative markets.

"China typically takes 60 per cent of Australian exports. We are working to boost buying from Vietnam, Thailand and other Asian countries," said a source familiar with the plan, speaking anonymously because he is not authorised to speak to the media.

Australia will begin harvesting its 2020/21 crop in April, giving exporters several months to line up new customers.

Australia's relationship with China soured in 2018 when it became the first country to ban China's Huawei from its 5G network, and worsened this year when Australia called for an inquiry into the origins of the coronavirus.

As ties deteriorated, China imposed tariffs on Australian barley and slowed its imports of Australian beef and coal.

China will also temporarily impose anti-subsidy fees on some Australian wine imports starting Friday, ramping up pressure on the industry.