'Appetite for Destruction: China's Trade in Illegal Timber' highlights China's lack of action against illegal logging

According to the London-based Environmental Investigation Agency (EIA), China's insatiable appetite for timber is driving a growing illegal trade that is stripping forests in Africa and Asia and fuelling conflict. The EIA report 'Appetite for Destruction: China's Trade in Illegal Timber' states that China is the world's top importer of illegal timber, with the trade worth about USD 4 billion a year. The numbers are a cause for concern given that Interpol estimates the global trade in illegal timber to be worth more than USD 30 billion. The EIA has released its report to highlight China's lack of action, in contrast to major trading partners such as the U.S. According to the report, China's role as the world's biggest timber trader means that further progress against illegal logging depends on the nation taking measures to exclude illicit timber from its market.

In the past, academic research and NGOs such as WWF and Global Witness have revealed the existence of illegal trading networks in central Africa, Burma and Russia leading directly to Chinese ports or cities. However, with the publication of this report, direct blame and responsibility is being directed to Beijing and to holding public enterprises and local government. The report goes on to state that China is at the center of a vast global traffic in illegally logged timber that is destroying entire swaths of forest around the world. It also reveals just how China's appetite for wood has grown in the past decades as a result of consumption by the new middle classes, as well as an export-driven wood industry facing growing demand from major foreign furniture and construction companies.

Unlike the U.S., the EU and Australia, which, under pressure from public opinion, have adopted legislation banning illegal timber imports, China has made no such move. The government has only signed bilateral agreements with the U.S., Europe, Indonesia and Burma, the benefits of which have yet to be demonstrated. The truth is that China has become the leading importer, consumer and exporter of the world's timber. Given that its own forests provide less than 40 percent of its needs, the gap between domestic supply and demand is set to grow. Timber Design & Technology takes a closer look at some of the key findings of the report.

China's Timber Deficit

Currently the world's biggest importer, consumer and exporter of timber and wood products, demand for timber and wood products in China for domestic consumption or re-export as processed wood and paper products has soared during the past 15 years. China's rise as a vast manufacturing hub has also included the rapid expansion of its wood processing industry - a six-fold increase in gross domestic product since 2002 has generated huge wealth, prompting a rising demand for wood and paper products within the country. In fact, China's consumption of wood products had reached 371 million cubic meters a year in 2007 and is expected to grow, at current rates, to 477 million cubic meters by 2020.

The growth of China's wood manufacturing sector began in 1998 despite Government-imposed strict logging controls following floods in the country. With domestic forests incapable of meeting the growth in demand, a gaping timber deficit emerged, one that today poses a direct threat to global forests. Despite commendable efforts at reforestation, which have led to an increase in the country's forest cover, domestic supply can at best meet only 50 percent of the wood and paper industry's required raw materials. Further, demand was expected to continue growing at around 8 percent a year, which meant that the deficit between demand and domestic production had risen to 150 million cubic meters per year by 2010.

In 2006, China's National Development and Reform Commission warned of the wood deficit reaching 150 million cubic meters and called for policies such as boosting domestic production to close the gap. However, it continues to grow and in 2009, domestic supplies accounted for only 38 percent of consumption. To bridge the gap, China has become the world's biggest importer of wood products. In 1997, it imported 35 million cubic meters of wood products; by 2009, it reached 113 million cubic meters. Demand in China is now being felt around the world as the number of countries from which it sources wood increases.

China's Wood Products Imports

According to the EIA, China imported around 180 million cubic meters (Round Wood Equivalent, or RWE) of wood products, worth USD 9.3 billion. This represents a 28 percent increase over 2010 volumes and a three-fold increase since 2000. Composition of the imports demonstrates China's role as a processing centre, with the bulk comprising round logs, sawn timber wood chips and pulp for paper manufacture. China has also registered a dramatic increase in combined paper, pulp and wood chips imports, from 37 million cubic meters (RWE) in 2000 to nearly 98 million cubic meters (RWE) in 2011, accounting for 53 percent of total wood product imports.

Imports of timber products (logs, sawn timber, furniture, plywood and other products) have also risen rapidly during the past decade, with China's trade policies promoting increased raw material imports such as logs and sawn timber as opposed to higher-value finished and semi-finished products such as plywood. In general, China relies heavily on timber imports for both hardwood and softwood logs and lumber, in both tropical and temperate species.

China's huge and growing demand for raw logs has dominated the country's timber imports throughout the past decade, with an average 33 percent of its log consumption being met by imports between 2000-09. From log imports in 2000 of 13.6 million cubic meters valued at USD 1.6 billion, China's imports by 2011 had more than trebled by volume to 42 million cubic meters worth around USD 8.2 billion. China imported around 30 percent of all logs traded worldwide in 2011.

Sawn wood imports have also risen significantly in recent years, reaching 38.8 million cubic meters (RWE) in 2011. Two countries dominated 2011 lumber imports - Canada supplied 12.3 million cubic meters (RWE) and Russia 10.2 million cubic meters (RWE), followed by America, Thailand and the European Union. Interestingly, as the share of lumber imports from low risk countries in China's top 10 suppliers has risen to 59 percent in 2011, the share from high-risk suppliers in the top 10 decreased to 41 percent. However, due to a sharp overall rise in imports, supplies from high risk sources actually increased by 4.1 million cubic meters (RWE) to 15.4 million cubic meters in 2011.

China's Wood Product Exports

China's total wood products exports have increased nearly seven-fold in the past decade, from around USD 5 billion in 2000 to USD 34.2 billion in 2010, which is equivalent to a volume of 71 million cubic meters (RWE) of timber products, pulp and paper. In terms of products, wood furniture is by far China's biggest export category by value, with 2010 sales of USD 15.8 billion, using 19 million cubic meters (RWE) of timber. The second largest category is paper, with exports of USD 9.57 billion, using 23 million cubic meters (RWE) of timber, followed by plywood and wood panel shipments worth USD 3.26 billion and a volume of 16.5 million cubic meters (RWE). The remainder was made up of a wide array of wood products, including flooring, mouldings and joinery.

The major markets for these exports include America, the EU, Japan and the Middle East. In 2010, the U.S. remained China's biggest market, importing 11.9 million cubic meters (RWE) of wood products valued at USD 7.7 billion, and a further 2.99 million cubic meters of paper sector products worth USD 1.5 billion. The U.S. was followed by the EU, which imported 8.48 million cubic meters of wood products valued at USD 5 billion, and a further 2.4 million cubic meters of paper sector products worth over USD 1.3 billion. Japan was China's third biggest export market in 2010, importing 4 million cubic meters of wood products valued at USD 2.1 billion, and a further 2.1 million cubic meters of paper sector imports valued at USD 920 million.

China's Domestic Timber Consumption

Despite a lack of reliable data on China's domestic consumption of wood products, the report argues that as the country becomes wealthier, its demand for wood is rapidly rising. According to the report, when previously confronted with concerns about imports of illegally logged timber, Chinese officials responded by claiming most of the wood was re-exported as finished products and that China was merely a processor, with most of the value accruing in end markets such as the U.S. However, this is no longer the case as China is now a significant end market in its own right.

The construction sector is the biggest driver of increased domestic wood product consumption in China. Given that 36 million new affordable homes are due to be built by 2016 under the Government's five-year plan, the increase in construction and home ownership is spurring a rising demand for a range of timber products such as flooring, furniture, panels and plywood. Domestic wooden furniture sales grew from about USD 10 billion in 2006 to around USD 29 billion in 2011, which was equivalent to 84 percent of the value of China's total wood product exports for the year. Deutsche Bank estimated in 2007 that only 16 percent of the country's wood products output was destined for export, with the remainder consumed domestically. Further, other sources have estimated domestic consumption at similar proportions of between 75 - 85 percent of overall production.

China's Illegal Timber Imports

The EIA report concludes by stating that as China has risen to become the world's biggest importer of timber products, it has also emerged as the leading destination for illegally logged timber, especially logs and lumber. Give that illegal logging and wood smuggling are by nature clandestine and criminal activities, an exact quantification of the volume of illicit wood entering China is challenging. However, by combining material flows with rates of illegal logging in source countries, credible estimates can be made.

For instance, a 2009 study found China had the highest total supply and use of illegally harvested timber worldwide, consuming between 39 - 69 million cubic meters (RWE) of illegal timber in 2008. With these estimates representing 37 - 66 percent of China's 2008 imports of 104 million cubic meters (RWE), applying these percentages to China's 2011 imports of 180 million cubic meters (RWE) implies that between 68 - 120 million cubic meters of imports may have been illegal.

Another 2010 study also calculated that 20 percent of China's wood imports in 2008 were of illegal origin. Applying this percentage to 2011 imports suggests China might have imported around 36 million cubic meters (RWE) of illegal wood products last year, worth USD 6.9 billion.

Tackling China's Illegal Timber Trade

The EIA report categorically states that the Chinese Government has done virtually nothing to curb illegal imports, while putting in place policies to ensure supply from some of the worst illegal logging hotspots in the world. Historically, large volumes of illegal timber imports into China have been re-exported as finished wood products to consumer markets in America, the EU and Japan. However, China's rapidly growing domestic consumer market is currently the main absorber of illegal timber imported into the country, and without action will be the chief driver of illegal logging worldwide in the future.

While other leading economies have instituted clear and principled prohibitions on illegal timber trade in recent years, China has to date resisted this leadership role, opting instead to present such policies as 'unsuitable' for its circumstances. China's emergence as the world's second biggest economy also means that the country is playing an increasingly high-profile role in global political and economic change. With such power comes responsibility, and it essential that the country acts decisively to cut illegal timber out of its path towards economic growth. And so, the fate of much of the world's natural forests is in China's hands. 

© Timber Design & Technology 2013