Over the past few years, no serious discussion of the global wood products industry has been possible without mention of the rise of China as a major player. For some, China’s emergence on the global stage represents an unprecedented opportunity to tap into the world’s fastest growing major economy. For others, the rapid development of the country’s wood processing industry represents an epic threat to primary and secondary processors around the world. While its true impact lies somewhere between these two extremes, one thing all can agree on is that China is disrupting the status quo throughout the hardwood products value chain.
China’s appetite for all hardwood products is huge and well-known. Over the past decade, China has changed from a relatively insignificant importer of American hardwoods to the largest single consumer outside of North America, with imports of all US hardwood products growing from less than US$7m in 1995 to more than US$369m in 2005. With Hong Kong and Taiwan thrown into the mix, total US hardwood exports to the region exceeded US$501m in 2005. However, it is important to keep in mind that this total for “Greater China” as a region is still significantly below the US$787m market for US hardwoods in the EU.
What is driving this increased consumption of imported hardwoods? One answer, of course, lies in China’s rapidly-expanding furniture industry which is consuming ever-increasing volumes of raw materials.
Contrary to popular belief, however, it is not the re-export market that dominates furniture production in China. Indeed, in 2005 China’s furniture production topped US$55bn, yet only about US$12bn of that production was exported.
The American Hardwood Export Council (AHEC) firmly believes that domestic consumption will continue to grow as millions of educated people born in the 1980s start their own households, which, of course, need to be furnished. Nevertheless, it is no secret that the rapid growth in China’s furniture manufacturing capacity is sending shock waves through global furniture markets, resulting in anti-dumping action in the US.
As the Chinese currency has “ridden the dollar down” against the euro and sterling, it remains to be seen how European producers and governments will react. In the long run, however, it is important to keep in mind that much of the growth in world demand for furniture over the past few years has been driven by Chinese consumption, and that trend is likely to accelerate.
Hardwoods are used for more than just furniture, of course, and it is the interior decoration market in China which has been at the centre of AHEC’s promotion in the region. China’s rapid economic growth and housing privatisation initiatives have created a generation of increasingly affluent consumers who are eager for quality interior furnishings.
China’s current run of strong, steady GDP growth –averaging more than 8% per year for the past decade – is helping to create a booming construction market in commercial and residential real estate. According to the Beijing Business Journal, China’s annual interior decoration market could reach anywhere from 800–1,000bn yuan (US$97.44-121.8bn) in 2006.
At times the scale of construction growth is difficult to comprehend. For example, according to the Chinese Ministry of Construction, it is estimated that by 2008 new flooring demand in China will reach 2.5 billion m2. China’s flooring sector has become a major industry with an annual production of more than 200 million m2 and annual sales of about US$36bn.
Timber has the tremendous advantage of being associated with both traditional Chinese aesthetic tastes and trendy western fashions. In this lucrative market, however, US and European temperate hardwood lumber producers face increasing competition from other temperate and tropical species, as well as laminated and composite materials. That is why AHEC has focused so much of its efforts on promoting US hardwoods through such initiatives as fitting out the interiors of two public-access show homes China.
While there is no doubt China represents a challenge to many hardwood companies around the world – particularly flooring and furniture manufacturers – it is equally certain that the country represents an opportun-ity of scale never before seen by many others. In addition to the current rate of construction, in the next five years Beijing will see the building or remodelling of over 300,000 luxury hotel rooms for the 2008 Olympics and the World Expo 2010, while at the same time tourism
