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Kerstin CanbyForest Trends
Beijing, July 2006
China and the Global Market for Forest Products:Transforming Trade to Benefit Forests & Livelihoods
Forest Trends, RRI, CIFOR and Partners
’00 – ’02 • Collaborate with CCAP to advise CCICED
Task Force on Forests and Grassland
’02 – ’06 Programs• China and Forest Trade in the Asia-Pacific
Region: Implications for Forests and Livelihoods (CCAP)
• Chinese Forest Policies – Impacts and Implications for Collective Forestry Sector (CAU)
• Collaborate with Peking University to advise CCICED Task Force on EcoCompensation
On Chinese domestic issues:– State Forest Administration (SFA), in particular the Forest
Economics and Development Research Center (FEDRC)– Chinese Academy of Forestry (CAF)– China Agricultural University (CAU)– Beijing Forestry University (BFU)– Other, regional universities, NGOs and forestry agencies
On Regional and International Studies:– World Agroforestry Center, Kunming (ICRAF)– IIASA– University of British Columbia, Canada– World Bank– Regional Community Forestry Training Center (RECOFTC)– Experts in Russia, PNG, Indonesia, Myanmar, Mekong
Collaborators
Basic Dynamics of Supply and Demand
Varying projections of domestic production and China’s ability to be self-sufficient by 2015.
NDRC 2006: 150 million m3 gap between domestic supply of industrial roundwood and demand (domestic consumption + exports).
This gap to be addressed by: • imports• improvements in domestic production• substitution• greater efficiency
Basic Objectives
• Identify implications of China’s growing demand for wood products
• To better understand China’s domestic policies impacts on forests, livelihoods, production and environmental protection
• How can China meet this demand through sustainable forest production which also brings livelihood benefits to rural areas and imports of known legal and sustainable wood products?
• Through its leverage on the global market, can China transform the global forest sector towards one that is more sustainable and brings benefits to both local economies as well as the environment?
Increasing Imports
Top Industrial Roundwood Importers
Source: FAOstat and China Customs
0
5
10
15
20
25
30
2000 2001 2002 2003 2004
Canada S. Korea Austria Sweden Japan Finland China
Mill
ion
m3
China’s Imports 1997-2005
• World leader in wood imports (from 7th to 2nd in last 7 years)• World’s leading importer of tropical wood• 2 X increase in pulp, waste and recycled paper• 3 X increase in timber• 80% of timber is logs and sawnwood
020406080
100120140160
1997
1998
1999
2000
2001
2002
2003
2004
2005M
illion
RW
E cu
bic
met
ers
Timber ProductImports
Pulp and PaperImports
Total Wood-based ProductImports
China’s Timber Imports by Product Type 1997-2005
05
101520253035404550
1997 1998 1999 2000 2001 2002 2003 2004 2005
Impo
rts(
mill
ion
cubi
c m
eter
s RW
E) Logs
Sawn wood
Wood chips
Fiberboard
Plywood
Particleboard
Veneer
Other
Logs & sawnwood up * Plywood & veneer down
Projected Trends in Import Growth
0
100
200
300
400
500
600
700
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
mill
ion
m3
impo
rts
Low end Mid High end
Projected imports at current annual growth rates (16% per year)
Trends based on Domestic Consumption Patterns
0
100
200
300
400
0 5000 10000 15000 20000 25000 30000 35000 40000
GDP per capita, USD 2000 prices
Consumption 2000, kg per capita
Japan 1980-2000
USA
Denmark
Sweden
Ireland
UK
Finland
CanadaNetherlands
Austria
Belgium
Singapore
Germany
France
Australia
ItalySpain
New Zealand
Rep. of Korea
Malaysia GreecePortugal
ArgentinaMexico
VenezuelaBrazil
Turkey
South Africa
Russia
China
India
China
USAGDP per capita and Paper Consumption
Int’l Demand for China’s Wood Products
36.1 million m3 RWE
44.6 million m3 RWE
Imports Exports
China80% imported volume
China's net domestic consumption of timber products is quite lowcompared to its timber product trade
Pulp and paper different story: only 11% is re-exported
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1997 1998 1999 2000 2001 2002 2003 2004
Expo
rts
(1,0
00
RW
E cu
bic
met
ers)
Timber products Pulp & paper Total forest products
Int’l Demand for China’s Forest Product Exports (1997-2004)
364% increase by value ($13.1b)Wooden furniture & plywood +400-1000%Logs & lumber stableWood chips -50%
0
2000
4000
6000
8000
10000
12000
14000
1997 1998 1999 2000 2001 2002 2003 2004
Year
Expo
rts
(mill
ion
US
dol
lars
)
Major Destinations of Chinese exports
US +800%Japan +200%Others +600% **EU +700%Hong Kong 20%
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
1997 1998 1999 2000 2001 2002 2003 2004
Expo
rts
(RW
E m
3)
Hong Kong Korea South Singapore Taiwan Japan United States EU Others
Major Destinations: Plywood
1000% increase
US and “others”
1. Taiwan 16%2. USA 13%3. S. Korea 12%4. Japan 8%5. Indonesia 7%
1. Canada 27%2. Indonesia 18%3. Russia 13 %4. Chile 10%5. US 10%
1. Indonesia 65%2. Malaysia 21%3. Russia 3%4. Japan 2%5. Hong Kong 3%
PaperWood PulpPlywood
1. Russia 18%2. USA 14%3. Thailand 13%4. Indonesia 12%5. Malaysia 8%
1. Russia 68%2. Malaysia 6%3. PNG 6%4. Myanmar 4%5. Gabon 3%
1. Russia 49%2. Malaysia 8%3. Indonesia 6%4. Thailand 5%5. PNG 4%
LumberLogsTimber Products
Largest Exporters of Wood Products to China (2004)Largest Exporter of Wood Products to China
Largest Exporters of Wood Products to China (2004)
Largest Suppliers of Wood Products to China (2005)
Importance of China’s Trade to Other Countries
Republic of Congo (Brazzaville)
0%
20%
40%
60%
80%
100%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Gabon
0%
20%
40%
60%
80%
100%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Mozambique
0%20%40%60%80%
100%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Central African Republic
0%
20%40%
60%80%
100%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
• Trees and forests are the primary asset of millions some of the world’s poorest people, and could be used as an important instrument for rural development – Summary of Impacts for Asia-Pacific Supplying Countries– Chinese Collective Forests: Contributions & Constraints– China’s Sloping Land Conversion Program After 4 Years– Analysis of China-Myanmar Timber Trade (2)– Overview of Forest Sector in Russian Far East: Production,
Industry and the Problem of Illegal Logging– China’s Impact on PNG’s Forest Industry– Thailand’s Forest Policies, Plantation Sector and
Commodity Export Links to China
II. Impacts: Within China and Regionally
1. Taiwan 16%2. USA 13%3. S. Korea 12%4. Japan 8%5. Indonesia 7%
1. Canada 27%2. Indonesia 18%3. Russia 13 %4. Chile 10%5. US 10%
1. Indonesia 65%2. Malaysia 21%3. Russia 3%4. Japan 2%5. Hong Kong 3%
PaperWood PulpPlywood
1. Russia 18%2. USA 14%3. Thailand 13%4. Indonesia 12%5. Malaysia 8%
1. Russia 68%2. Malaysia 6%3. PNG 6%4. Myanmar 4%5. Gabon 3%
1. Russia 49%2. Malaysia 8%3. Indonesia 6%4. Thailand 5%5. PNG 4%
LumberLogsTimber Products
Largest Exporters of Wood Products to China (2004)Largest Exporter of Wood Products to China
Largest Exporters of Wood Products to China (2004)
Largest Exporters of Wood Products to China (2005)
1. Taiwan 16%2. USA 13%3. S. Korea 12%4. Japan 8%5. Indonesia 7%
1. Canada 27%2. Indonesia 18%3. Russia 13 %4. Chile 10%5. US 10%
1. Indonesia 65%2. Malaysia 21%3. Russia 3%4. Japan 2%5. Hong Kong 3%
PaperWood PulpPlywood
1. Russia 18%2. USA 14%3. Thailand 13%4. Indonesia 12%5. Malaysia 8%
1. Russia 68%2. Malaysia 6%3. PNG 6%4. Myanmar 4%5. Gabon 3%
1. Russia 49%2. Malaysia 8%3. Indonesia 6%4. Thailand 5%5. PNG 4%
LumberLogsTimber Products
Largest Exporters of Wood Products to China (2004)Largest Exporter of Wood Products to China
Largest Exporters of Wood Products to China (2004)
Largest Exporters of Wood Products to China (2005)
Poor Governance of Natural Resources and Corruption Common in 7 of Top 10
Russian Federation
Indonesia
Canada
USA
Malaysia
New Zealand
Thailand
Germany
GabonPNG
Myanmar
-1
-0.5
0
0.5
1
1.5
China's Supplier Countries(ranked by RWE imports 2001)
Envi
ronm
enta
l Gov
erna
nce
Inde
x
Russian Far East/Siberia: Significant resource base, but much is illegal and ecologically damaging
Russian policy reform to encourage value-added processing within Russia itself
Malaysia:Malaysia increasingly concerned about reputation risk & being blamed for laundering illegal Indonesian lumber
Myanmar:Human rights abuses, illegality, corruption, harvesting organized by militants
Problems in Major Supplying Countries
Papua New Guineaillegal logging, illegal labor, human rights abuses
Forest Department review World Bank audits confirm (2000-2005)
Thailand, Cambodia, VietNam: Natural forest being lost or threatened, intense social conflict-exclusion over land rights, pressure to increase plantations to supply China
Problems in Major Supplying Countries
Who Benefits from Illegal Logging
1 cubic meter illegally logged hardwood(from Russian forest to Chinese border)
Chinese middleman,
$70
Bribes, $30
Purhcase of depot documents $10
Gasoline, $5 Forest leaser, $5
Loggers, security and truck driver,
$18
Who Benefits: Value Chain of Furniture Exports to USA
1000
2000
3000
4000
5000
Supplie
r
Countr
ies
Rev
enue
(mil
$)
Chines
e
mftrers
USA
retaile
rs
Total Sales ValueRevenue Added
US, EU and other major markets who are benefiting from low-cost imports from China are critical “drivers” and have important leverage and responsibility
China Industry Vulnerable from Supply Side
Insecure supply and prices as– Natural forests dwindle in SE Asia– Plantations are not yet on-line– Potential for illegal logging campaigns increase
(Indonesia 2005 government crackdown > 83% decrease in volume of merbau logs arriving in China)
4-9Cambodia10-15Myanmar13-16PNG10Indonesia>20Russian Far East
Years left of natural forests (est’d)Country or Region
• Changing buyer preferences (legal verification, certification) in some of its fastest growing markets: EU, North America, Japan
• Governmental Public Procurement Policies– European countries and Japan drafting or implementing
policies requiring public projects to procure only wood products that have been legally verified or certified with chain-of-custody systems
• Retailers requesting audits of their Chinese suppliers: – UK, Netherlands, Spanish,
German trade associations are likely to conduct audits of major Chinese suppliers & demand verification of legal sourcing of raw material
Vulnerability of Chinese industry in European & N American Markets
Consumer side: • EU Forest Law Enforcement, Governance
and Trade (EU FLEGT) Action Plan– EC and member states examining regulatory
options to eliminate trade in illegal logs -- making use of existing legislation, or possible new legislation that could be enacted either at Member State or the EU level.
Vulnerability of Chinese industry
China Industry Vulnerable from Demand Side
Insecure supply and prices as– Natural forests dwindle in SE Asia– Plantations are not yet on-line– Potential for illegal logging campaigns increase
(Indonesia 2005 government crackdown > 83% decrease in volume of merbau logs arriving in China)
4-9Cambodia10-15Myanmar13-16PNG10Indonesia>20Russian Far East
Years left of natural forests (est’d)Country or Region
Solutions: Increasing Domestic Production
Varying projections of domestic production
0
50
100
150
200
250
300
350
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Mill
ion
m3
Sources: Zhou (SFA) 2001, Bull and Nilsson 2004
Increasing Domestic Production
1. Support to SFA and others to boost domestic production for conservation and poverty alleviation
2. Add….
Solutions: China take a leadership on legal imports
• Public procurement policies requiring public projects to procureonly wood products that have been legally verified or certified with chain-of-custody systems through 3rd party verification. UK, Japan, Vancouver Olympics, London City
• Agreements for bi-lateral cooperation: Indonesia’s log export bans complemented by Malaysia’s ban on logs imported from Indonesia – response to call for assistance from Indonesia’s ministers