In just 10 years, China has moved from seventh to second among all nations in terms of the total value of its forest products imports, and it is now the leading importer of industrial roundwood.
Between 1997 and 2005, China’s total forest product imports more than trebled in volume (roundwood equivalent) from 40 million to 134 million m3, and more than doubled in value. During this time, the nature of Chinese forest product imports also changed, as China increasingly captured more value in its own manufacturing process.
The dramatic expansion of domestic consumption and export demand for China’s low-cost manufactured wood products over the past eight years, in a nation with very limited per capita forest resources, has fuelled this rise in imports of wood products from around the world. China now exports two-thirds the amount of wood products that it imports, and captures almost a third of the global trade in furniture.
China’s own domestic production capacity is directly linked to future import scenarios: whatever cannot be produced domestically will need to be met by imports. By 2005, the volume of imports (134 million m3) had already caught up with the official levels of domestic industrial roundwood removals.
Plantation investments
The Chinese government has been investing heavily in new plantation projects in order to increase home production. However, the State Forestry Administration’s (SFA) projections for roundwood production far exceed many experts’ most optimistic scenario. Conflicting public statements in February 2006 from China’s National Development and Reform Committee (NDRC) and the SFA highlights the level of uncertainty about China’s own domestic production capacity. While the SFA stated that China’s forest programmes would reach self-sufficiency by 2015, the NDRC was estimating a supply gap of more than 150 million m3 per year, with this gap to be covered by increased imports, substitution, efficiency and more tree production. Within a month, the Ministry of Finance had instituted a 5% tax on disposable wood chopsticks (a staggering 1 million m3 a year) and wood flooring products.
Forest Trends’ and partners’ research estimates that policy reforms in China’s forest sector could result in the production of an additional 15-40 million m3 of roundwood a year by 2015 within China – equal to, or greater than, all the illegal wood currently estimated (by the Environmental Investigation Agency in 2005) to be imported by China at present. To do so, a number of obstacles will have to be overcome, such as policy reforms affecting the current logging ban, a log harvesting quota, high fees and taxes which have had far-reaching negative impacts on many collective forests and communities. The productivity of state-run public forests has also been constrained by factors such as over-harvesting in the past, the slow pace of forestry reforms and the immaturity of three-quarters of the standing stock. However, until these reforms are instituted and come online, research indicates that the trends of rising imports will continue.
In many supplying countries, particularly those with poor governance records, increased trade flows are exacerbating the problems associated with unsustainable harvesting, corruption, illegal logging and the abuse of indigenous and community rights. The table above shows the top suppliers to China, with countries considered by environmental groups to have governance problems in italics. While China is not the only importing country and two-thirds of what it imports is manufactured and re-exported, it does account for over half the log exports from Papua New Guinea (PNG), Myanmar and Indonesia, and some 40% of log exports from the Russian Far East.
There are also serious concerns about the rapid decline of natural forests in supplying countries and their ability to supply products in future. While many countries in East Asia have ambitious plantation programmes, many of these are under-performing or not expected to come online for many years. It is estimated that, at present cutting rates, the natural forests in China’s top supplying countries will be logged out (Cambodia in four to nine years, Myanmar in 10-15, PNG in 13-16, Indonesia in 10 and the Russian Far East in more than 20).
Wood products exports
China now exports two-thirds of the volume of wood products that it imports. Between 1997-2005, the export value of forest products rose from US$3.6bn to US$17.2bn, with 80% of the timber products consisting of furniture, wood-based panels and wood chips in 2005. Exports of wood furniture have increased at an average annual rate of 19% to 12.7 million m3 between 1997-2005. During the same period China’s plywood exports increased ten-fold – to over 10 million m3 – making China the largest exporter of plywood in the world.
While the number of countries importing forest products from China has steadily increased, a relatively small number take the lion’s share of China’s exports. The US, Japan and Hong Kong have long been the major destinations of Chinese exports, with the EU member countries playing an important, but less substantial role. But imports by the US and EU, in particular, have exploded since 1997. US imports have increased almost 1,000% since 1997 – and has been the single largest importer since 2000. Imports by the EU have grown dramatically by almost 800%, with the UK the top importer and accounting for approxi-mately one-third of all EU imports.
China’s most pressing task is to improve the productivity of its own forestry sector and reduce its reliance on imports from countries with limited capacity to manage their own forests effectively. It will need to do so in a way that alleviates rural poverty and does not impose significant costs on the industry. This will require a number of measures, including regulatory reforms, the strengthening of property rights in rural areas, a new approach to allocating subsidies and reforming the public forest sector.
On the issues of imports of potentially illegal wood products, however, there are steps all consumer and importing governments can take, including:
- Develop and harmonise public procurement policies. China could start with a pilot programme to ensure verified legal sourcing for construction related to the 2008 Beijing Olympics.
- To protect the reputation both China and the international wood products industry, actively promote certification, log tracking, supply chain management approaches and adapt existing legislative approaches tackle underlying problems in both consumer and supply countries. Certification, verification of legality, independent monitoring and other related tools are now well recognised as useful in addressing illegal logging. Adapting and extending existing money laundering and anti-bribery legislation is another priority. Anti-bribery legislation covering nationals engaged in illegal activities abroad could also be considered.
