PROJECT COMPLETION REPORT

PROJECT COMPLETION REPORT DEMAND AND SUPPLY OF TROPICAL WOOD PRODUCTS IN CHINA TOWARDS 2020 HOST GOVERNMENT: The People s Republic of China EXECUTING AGENCY: Research Institute of Forestry Information and Policy, CAF 1

PROJECT NUMBER PD 480/07 REV.2 (M) STARTING DATE March 1 st, 2010 DURATION 29 months(from March 2010 to July 2012, the last five months are the added time) PROJECT COSTS ITTO US$ 263 520 THE ORDINAL NUMBER AND TYPE OF REPORT Executing Agency US$ 147 468 Total US$ 410 988 2012 01/Project Completion Report PROJECT TECHNICAL AND SCIENTIFIC STAFF Roles Name Contact details Project Coordinator Dr. Hu Yanjie Tel: +86-10-62888981 Fax: +86-10-62888981 Email: yanjie@caf.ac.cn Main staff Professor Shi Kunshan Tel: +86-10-62888856 Email: shikunshan@yahoo.com.cn Professor Lin Fengming Tel: +86-10-62889732 Email: linfengming@caf.ac.cn Dr. Tan Xiufeng Tel: +86-10-62888981 Email: txf@caf.ac.cn Dr. Liao Xianchun Tel: +86-10-62889719 Email: liaoxian2@yahoo.com IMPLEMENTING INSTITUTE Full name The Institute of Forestry Policy and Information Chinese Academy of Forestry Address Wan Shou Shan, Beijing 100091, P. R. China Telephone +86-10-62889713 Fax +86-10-62887192 E-mail green21@caf.ac.cn August, 2012 Beijing China 2

Table of Contents Executive Summary... 1. Project Identification... 1.1 Context... 1.2 Origin and Problem... 2. Project Objectives and Implementation Strategy... 3. Project Performance... 4. Project Outcome, Target Beneficiaries Involvement... 5. Assessment and Analysis... 6. Lessons Learned... 7. Conclusions and Recommendations... Annex 1: Project Financial Statement... Annex 2: Project Cash Flow Statement... 3

Executive Summary i)with the rapid development of economy and urbanization, China s demand for wood products is increasing dramatically and its potential is great in future. Meanwhile, along with the progress of integrative global economy, Chinese wood products market has become an important part of international wood products market. In addition, China is in a critically transitional period, for forest sector, it is experiencing a historic shift from a focus on timber production to ecological improvement. As the largest production and export country of furniture, plywood and wooden flooring in the world, the gap between supply and demand for timber is becoming bigger and bigger. In order to reach the balance between supply and demand of wood products market, it is the most important task to get clear understanding of the situation and future trend of supply and demand of wood products market. In the context, the project will study the factors which influence domestic consumption and export of tropical wood products in the new era and forecast the supply and demand of tropical wood products in China in 2020. ii)the specific objective of the project is to analyze the timber situation in China by 2020 with focus on tropical timber to increase market transparency in China. In order to promote the development of international tropical forest product markets and satisfy domestic market demand for tropical wood products, the project will study not only demand, supply and production within the Chinese tropical forest product markets but also the position of China's demand and imports within the global tropical forest product markets. In order to acquire sufficient materials related to supply and demand of domestic market, the project team will closely collaborate with relevant industrial associations. In order to improve the forecasting accuracy, qualitative and quantitative methods will be applied in the project, and forecasting model will be set up to ensure the objective, accurate results. In addition, participatory method will be adopted in all project activities and consultative mechanism will be carried out with stakeholders. iii)almost all project activities are carried out as planned. At the end, the project has extended five more months to wait for the updating official data, make further effort in revising for more concrete results. iv)the research report entitled Demand and Supply of Tropical Wood Products in China Towards 2020 is helpful for Chinese and foreign competent authorities, relevant industrial societies and enterprises to have sufficient understanding of supply and demand of China s tropical forest product markets, thus they could have a basis to follow when they implement macro management, formulate policies and make decisions. Meanwhile, the project greatly enhanced the stakeholders understanding on the situation of Chinese 4

tropical wood products market and its development trends in 2020. This will create better conditions for achieving the balance between supply and demand, help domestic tropical forest product producers and traders choose cooperative partners and make feasible marketing strategies. Furthermore, the capacity of implementing institute has been further enhanced through implementing the project, close relationship has been established between implementing institute with related government authorities, some projects focusing on tropical timber trade have been allocated to implementing institute to continue collecting information and trade data on forest products. v)when preparing the Project proposal, we had gone through a very through process of literature search and surveys to gain insight into the changes in forest products market over the past decade. Therefore, the Project had been adequately designed through the correct definition of problems, the accurate identification of project objectives, and the viable choice of implementation strategy. At the same time, we consulted different stakeholders to solicit their contributions to the proposal, this ensure the Project is able to create impacts to the right target beneficiaries. In addition, the executive agency through previous projects in this field have established good working relationships with government organs and other stakeholders, beneficiaries took active part in project activities. All these contribute to the successful completion of the project. vi)through implementing the project, main lessons learned are summarized as below: Firstly, as the manufacture and trade center of wood products in the world, it is of significance to forecast demand and supply of wood products in China in foreseeable future. Therefore, the project identification is of great importance. Secondly, collaboration with stakeholders is very important throughout the project. Thirdly, the information correspondents from key consumer provinces of tropical wood products played important role in collecting data and market surveys. Fourthly, the international consultant played an important role in framework design and finalization of project technical report. Fifthly, the international workshop served as a platform for professionals and stakeholders to exchange information in the field of wood product markets. Since China plays an increasing important role in the global processing and trading chain of tropical wood products, and the Chinese wood product market has a strong appeal to outside world, it is suggested that ITTO should continuously support depth studies on Chinese tropical wood market. 5

1. Project identification 1.1 Context i) Social, economic and environmental context With the rapid development of national economy and constant increases of living standard of the people, China s domestic demands for wood products increase rapidly in recent years. At the same time, due to the rapid development of globalization of the world economy, and the significant advantage of low labor force cost and huge market potential in China, global wood products manufactures are gradually transferring to China, some enterprises from developed countries and regions such as North America, Europe and Japan are transferring their wood manufacture to China one after another. China has become the manufacture and trade center of wood products in the world. Therefore, due to the fast growth of domestic demands and the strong drive of export demands, wood products manufacture industry develops rapidly in China. China has now become the largest production and export country of furniture, plywood and wooden flooring in the world. However, owing to shortage of domestic forest resources, and particularly due to the fact that commercial timber production for natural forests was drastically reduced since the implementation of Natural Forest Protection Program (NFPP) in 1998, the gap between supply and demand for timber is becoming bigger and bigger. Therefore, China has to import large amount of timber to meet her domestic demands. China has now become the largest country of logs import and the second largest country of wood products import in the world. China s consumption of tropical wood products (log and sawnwood) was mainly met by international market. China has been and will still be the focal point for her demands for wood products, especially for tropical wood products in the global markets. It is a fact that the awareness of sustainable forest management, combating illegal logging has been raising, people pay more attention to environmental protection. China has been subjected to criticism and censure from some NGOs for its imports of great deal of timber, especially tropical timber from foreign countries. Facing these challenges, Chinese government take active part in international initiatives such as EU-FLEG to improve marketing and distribution of tropical timber and timber product exports from sustainably managed and legally harvested sources and which are legally traded. At the same time, the guideline of developing forest resources in foreign countries is being established in order to regulate overseas forest enterprises actions. In addition, forest certification develops rapidly in China. The national standard of forest certification has been issued and carried out pilot test in some regions in China. 6

ii) Project location and relevant national policies The project location is China. China is in a critically transitional period, for forest sector, it is experiencing a historic shift from a focus on timber production to ecological improvement. Forestry must meet not only the diversified demand of social for timber and other wood products but also the need for ecological improvement and safeguarding national ecological security in China. Ecological demand has become a priority of society from forestry in China. The Forestry Eleventh-Five Year Plan (2006-2010) indicates that China will continue to implement NFPP, stopping commercial logging of natural forest located in upriver areas of the Yangtze River and the Yellow River, reducing timber production in Northeast and Inner-Mongolia state-owned forest areas. At the same time, the Forestry Eleventh-Five Year Plan attaches importance to forestry industry. It also gives emphasis to the harmonization of forest ecological system, forest industry system and forest culture system. Because of the long period needed for forest plantations to reach maturity and because plantations in China cannot produce the preferred large diameter and high quality logs, the country will still rely on imports to meet its demand for large diameter logs. To encourage imports of raw materials, such as timber, the Chinese government has adopted the measures to abolish or greatly lower import tariff. In addition, the policy of relaxing import operation regulations has been developed for domestic enterprises undertaking timber operation and foreign trade. In China, the overall strategy to address imbalances in timber supply and demand is to realize self-sufficiency in fiber timber and non-veneer type wood based panel in 2020, even produce some surplus while, at the same time, relying on imports for high quality, large-diameter timber especially hardwoods. The department in charge of forestry has formulated medium and long-term plans to vigorously develop the building of fast-growing plantation bases (note: this project was started on August 1 st, 2002). At the same time, in order to combat illegal logging and protect natural forests, Chinese government formulated a system of domestic logging quota and the NFPP plan. 1.2 Origin and Problem i) Origin With the rapid development of economy and urbanization, China s demand for wood products is increasing dramatically and its potential is great in future. Meanwhile, along 7

with the progress of integrative global economy, especially China s joining in the WTO, Chinese wood products market has become an important part of international wood products market. In recent years, more and more international wood products manufactures moved into China, forest industry developed rapidly in China. It is a fact that China has become the international center of manufacture, consumption and trade of wood products in the world. Driven by both domestic consumption and export demand, the demand for timber (especially log and sawnwood) increased sharply. Up to now, China is the largest log import country in the world. Owing to continuously shortage of the domestic timber especially tropical large-diameter hardwood, as well as increasing timber demand from furniture and decoration industries, the demand for timber especially tropical hardwood will increase steadily. In view of the important role that China plays in the global forest product trades, it is necessary to forecast the supply and demand of Chinese tropical wood products market. In addition, more and more countries started to restrict or prohibit exporting tropical logs, the voice combating illegal logging and trade is becoming stronger and stronger. It is necessary for Chinese government to take effective measures to readjust the development of forest industry in the context, and make great effort to reach the balance between supply and demand of wood products market. In order to realize the objective, it is the most important task to get clear understanding of the situation and future trend of supply and demand of wood products market, so as to provide bases to the relevant authorities for their decision making, as well as provide important market information to ITTO member countries. Therefore, as a follow up of the ITTO project PD 25/96 Rev.2(M)(1997-1998), China s Consumption of Forest Products and Its Demand for Them from the International Tropical Forest Products Market by the Year 2010, the project will study the factors which influence domestic consumption and export of tropical wood products in the new era and forecast the supply and demand of tropical wood products in China in 2020. The outputs of the project will not only provide references to domestic authorities for making wood products market policies, but also provide market information to ITTO producer and consumer countries for making sound marketing strategies, which will help to facilitate close cooperation between China and other ITTO member countries, and ultimately promote sustainable development of international trade of tropical wood products. ii) Main problems to be addressed 8

At present, reliable and consistent data and information are not available on the future demand and supply of tropical wood products market. Most of the existing forecasting studies on wood demand and supply only touch upon the wood product demand through domestic consumption, some driving factors such as demand for export have not been taken into account. In addition, there were different data and information from different stakeholders on the forest products market because of different definitions of the same terms, repeated calculation etc. At the same time, lack of coordination and information sharing among the key sectors has also affected the reliability, consistency and integrality of the data and information on forest products market. Some stakeholders such as producers, traders and exporters usually make wrong decisions because of having no idea on demand and supply of tropical wood products. All these have a negative impact on achieving the balance between demand and supply of tropical wood products, in other words, obstructing the sustainable development of tropical wood products market. In general, the main problems addressed by the project are as followings: Lack of reliable and consistent data and information on production of tropical wood products in China. Lack of reliable and consistent data and information on consumption of tropical wood products in China. Lack of systematical analysis on trade conflicts and trade policy trends. Framework for consultation among stakeholders has not been established, 2. Project Objectives and Implementation Strategy i) Project objectives The development objective of the project is to improve the supply of tropical wood products from sustainably managed forests to Chinese market and promote sustainable development of global wood products trade. The specific objective of the project is to analyze the timber situation in China by 2020 with focus on tropical timber to increase market transparency in China. 9

ii) Implementation strategy In order to promote the development of international tropical forest product markets and satisfy domestic market demand for tropical wood products, the project will study not only demand, supply and production within the Chinese tropical forest product markets but also the position of China's demand and imports within the global tropical forest product markets. It will provide information to China s domestic enterprises undertaking tropical wood products trade, operation, manufacturing and processing. This will be done through publishing periodical newsletter. In order to acquire sufficient materials related to supply and demand of domestic market, the project team will closely collaborate with relevant industrial associations (such as China National Wood products Industry Association, China National Wood products Trading Association, Chinese Association of Timber Circulation, Chinese Association of Architecture Decoration, Chinese Association of Furniture and Chinese Association of Paper-Making) and General Administration of Customs (GAC, the major source of import and export statistical data). In addition, contacts and cooperation will be established with the agencies of major producer and exporting countries set-up in China (including embassies and trade promotion agencies) and with the industrial associations in China and overseas. In order to improve the forecasting accuracy, qualitative and quantitative methods will be applied in the project, and forecasting model will be set up to ensure the objective, accurate results of supply and demand in 2020. In all activities of the project, participatory method will be adopted and consultative mechanism will be carried out with stakeholders. It is necessary to ensure outputs more practical, objective and feasible. iii) Assumptions and risks This project will involve collaboration with many domestic and international institutions and there are risks of failed or delayed cooperation. Fortunately for almost all aspects of the data and information collection there is more than one possible source so the risk of delay or failed collaboration can be mitigated. For the sake of timely accomplishment of the planned objectives the project will require collaboration from domestic departments such as industrial associations, major forest product producing enterprises and trade companies as well as major forest product markets and trade ports. The project will also need the support of Chinese government organs (such as the Ministry of Commerce) and its commercial institutions abroad, the SFA, GAC and National Bureau of Statistics in 10

order to collect materials. The risks of failure in this respect can be mitigated as the CAF through previous projects in this field have established good working relationships with relevant bodies. 3. Project Performance (a) Specific objective Specific objective Analyze the timber situation in China by 2020 with focus on tropical timber to increase market transparency in China Performance The timber situation in China by 2020 is analyzed in the research report. (b) Outputs and related activities Output 1.1 Research report Outlook on demand and supply situation of tropical wood products in China in 2020 Activity Planned Implemented 1.1.1 Conduct 15 domestic Completed. 15 domestic investigations had been investigations carried out in South China (Guangdong, Hainan, Guangxi and Fujian provinces, 4), East China (Shanghai City, Zhejiang, Jiangsu and Shandong provinces, 4), Southwest China (Yunnan, Sichuan and Xinjiang provinces, 3), North China (Beijing and Tianjin, 2), Northeast China ( Liaoning and Heilongjiang Provinces, 2), to collect information on timber resources, production and consumption. 1.1.2 Collect, collate and Completed. copy relevant materials 1.1.3 Compile and translate Completed. research report 1.1.4 Publish and Completed. The research report named Demand disseminate research and Supply of Tropical Wood Products in China report Towards 2020 had been completed and disseminated. 1.1.5 Attend international Completed. Three international exchanges had 11

forums been carried out, attending the XXIII IUFRO World Congress in Seoul, August 2010; Visiting CENTRAFOR of University of Washington, May 2010; Visiting Forest Products Laboratory of USA, December 2011. Output 1.2 Analysis report - Productive capacity of Chinese tropical wood processing enterprises and the end uses of the imported tropical logs Activity Planned Implemented 1.2.1 Collect materials Completed. 1.2.2 Conduct 8 domestic investigations to typical wood processing enterprises Completed. In order to collect information on the end use of imported tropical forest products, 8 domestic investigations had been carried out in 2 flooring enterprises and 2 furniture manufacturer of Guangdong Province, 3 flooring enterprises and 1 wooden door manufacturer of Zhejiang Province, 2 plywood manufacturers of Shandong Province, 2 rosewood furniture manufacturers and 1 flooring manufacturer of Shanghai. 1.2.3 Hold a seminar to share information among Completed. A information sharing seminar was held in December, 2010 in CAF. enterprises 1.2.4 Analyze data collected and verify these data with related Completed. Project team visited some related associations and statistic division of SFA to verify information and data. stakeholders 1.2.5 Write report and Completed. translate it into English 1.2.6 Print and disseminate the report Completed. Analysis report on Chinese tropical wood processing enterprises is available Output 1.3 Investigation report - A survey on consumers preference on tropical wood products in China Activity Planned Implemented 1.3.1 Collect and collate Completed. The questionnaire had been worked existing materials, work out and be distributed during late half of 2010. 12

out questionnaire and distribute it and get feedback 1.3.2 Carry out 7 domestic investigations in main consumption areas 1.3.3 Write and translate the report 1.3.4 Print and disseminate the report Completed. 7 domestic investigations had been carried out in Beijing, Guangzhou, Shanghai, Shenyang, Kunming, Harbin and Nanjing cities to collect information and make market surveys. In addition, we got feedback from Wuhan, Chendu, Taiyuan, Zhengzhou, Xian, Wulumuxi, Jinan and Hefei cities through correspondents. Completed. Completed. The analysis report on consumers preference on tropical wood products is available. Output 1.4 Analysis report - Conflict issues and policy trends on China s trading of tropical wood products Activity Planned Implemented 1.4.1 Collect, copy and Completed. collate existing materials 1.4.2 Visit to and consult with stakeholders Completed. Project team had visited governmental departments, industry associations, production enterprises and traders, as well as representative offices of foreign organizations in China 1.4.3 Write and translate Completed. report 1.4.4 Print and disseminate research report Completed. Analysis report named trade friction and the countermeasures is available. Output 1.5 Holding an international workshop Perspective on Global Tropical Wood Products Market: Potential and Challenge and publishing proceedings Activity Planned Implemented 1.5.1 Set up an organizing Completed. 13

group to draw plan 1.5.2 Invite 6 participants from tropical timber producing countries Completed. 6 participants from Ghana, PNG, Malaysia, Vietnam, Myanmar and New Zealand were invited to be speakers of the workshop. 1.5.3 Invite 15 Chinese participants Completed. More than 60 participants attended the workshop 1.5.4 Hold a workshop Completed. The international workshop - Perspective on Global Tropical Wood Products Market: Potential and Challenge had been held in Beijing on October 13-14 of 2011 1.5.5 Publish and disseminate workshop proceedings Completed. The proceeding Perspective on Global Tropical Wood Products Market: Potential and Challenge had been printed and disseminated. Output 1.6 Publishing the China s Forest Products Market Information in both Chinese and English Activity Planned Implemented 1.6.1 Collect materials and solicit contributions Completed. 1.6.2 Engage 12 specially Completed. invited correspondents 1.6.3 Editing and translation Completed. 1.6.4 Printing, publishing and disseminating Completed. Twenty four issues of China Wood Products Market Information have been compiled and published both in Chinese and English (c) Schedule Starting date: March 1 st, 2010 Duration: 29 months (from March 2010 to July 2012, the last five months are the added time) (d) Total amount of expenditure The total amount of expenditure is US$ 263 520 from ITTO contribution. Overall project budget were spent as planned. 14

4. Project Outcome, Target Beneficiaries Involvement i)the extent to which the project specific objective was achieved The specific objective of the project is to analyze the timber situation in China by 2020 with focus on tropical timber to increase market transparency in China. The project research report analyzed the timber situation in China with a focus on tropical timber. This report is organized as follows: Chapter 1 presents information on China s forest resources. It includes forest area, inventory level, ownership data and the type and category of China s forest resources. It divides forests into natural and plantation forests and describes tropical forests. Chapter 2 examines the production and consumption of wood products in China. Historical trends are established from data collected on logs, sawnwood, wood-based panels, veneers, wood flooring, wood furniture and wood chips. Distinctions in the trends are made between tropical and non-tropical products. Chapter 3 examines international trade in wood products. The sources and destinations of products from and to China are recorded. The analysis contains information on both value and volume of trade activity. As in previous chapters, distinctions are drawn with respects to tropical wood products trade activities. Chapter 4 introduces China s timber consumption and domestic supply situation in 2010. It then forecasts consumption to 2015 and 2020. In Chapter 5 the forecast model for supply and demand for tropical wood products is presented. The model was developed for the project and reviewed by experts in the field. Chapter 6 presents policy recommendations in order to alleviate the conflicts between supply and demand of tropical timber. In order to complete the research report, major project activities and outputs included data collection, analysis and preparation of interim reports, two separate analysis reports and an investigation report, including the analysis reports on the productive capacity of Chinese tropical wood processing enterprises and the end uses of the imported tropical log were finalized and use to develop this final research report. Outreach activities included publishing and disseminating China s Forest Products Market Information, and holding seminars and an international workshop, which are useful tools to increase information transparency of China s wood product markets. A newly-created forecasting model for the supply and demand of tropical wood products in China, and questionnaires for enterprises and consumers were developed for the project. Therefore, as a follow up of the ITTO project PD 25/96 Rev.2(M)(1997-1998), China s Consumption of Forest Products and Its Demand for Them from the International Tropical 15

Forest Products Market by the Year 2010, the project had studied the factors which influence domestic consumption and export of tropical wood products in the new era and forecast the supply and demand of tropical wood products in China in 2020. The specific objective had been achieved to great extent. The outputs of the project will not only provide references to domestic authorities for making wood products market policies, but also provide market information to ITTO producer and consumer countries for making sound marketing strategies, which will help to facilitate close cooperation between China and other ITTO member countries, and ultimately promote sustainable development of international trade of tropical wood products. ii)the situation existing The situation after project completion is described as bellows: Firstly, the research report entitled Demand and Supply of Tropical Wood Products in China Towards 2020 has been finished and disseminated, its content not only touching upon the analysis of factors influencing tropical wood products supply and demand in China, but also forecasting supply and demand trend in 2020 through data analysis and forecasting model, providing feasible scenarios and suggestions on how to satisfy future market demands and realize balance between supply and demand, which is helpful for Chinese and foreign competent authorities, relevant industrial societies and enterprises undertaking tropical forest product operation to have sufficient understanding of supply and demand of China s tropical forest product markets, thus they could have a basis to follow when they implement macro management, formulate policies and make decisions. Secondly, through conducting domestic investigations, holding stakeholders consulting meeting, seminars and international workshop, expanding the exchange network of international forest product information, especially publishing the reference materials (analysis reports and investigation report, and newsletters), the project greatly enhanced the stakeholders understanding on the production, demand and trade situation of Chinese tropical wood products market and development trends in 2020. This will create better conditions for achieving the balance between supply and demand and sustainable cooperation between China and producing and consuming countries of tropical timber. At the same time, this is also helpful for domestic tropical forest product producers and traders choose cooperative partners and make feasible marketing strategies. Thirdly, after completion of the project, the capacity of the ITTO supported Tropical Forest Product Information and Consultation Center of China has been further enhanced, its 16

resource and information base is expanded, its links with the wood products sector in China and in producer countries become closer and closer. Producers and traders at home and abroad can timely understand the market situation of tropical wood products through the newsletter Chinese Wood products Market Information. In addition, implementing institute established more close relationship with governments such as State Forestry Administration, Ministry of Commerce during implementing the project. The Plan and Financial Department of SFA pay more attention to tropical wood market and related trade issues, some projects focusing on tropical timber trade has been allocated to implementing institute, some cooperative activities on African forestry are also being conducted between CAF and Ministry of Commerce. iii)the participation of target beneficiaries The project team has been contacting with domestic beneficiaries, for example, by means of telephone, emails, holding seminars etc, to know what they need and to provide domestic and oversea wood products market information in multiple ways for their reference to develop policies and coordinate production and marketing. For overseas beneficiaries, the project team has been contacting them through field visits or by telecommunications and to know international market information and related policies, as well as their requirements. During implementing the project, target beneficiaries and their participation are as followings: Government authorities, including State Forestry Administration, Ministry of Commerce and Customs etc., will mainly participate in activity 1.1.2, 1.1.4, 1.2.4, 1.4.2 and 1.5.3. Related associations, including National Forest Industry Association, National Timber Distribution Association etc., will mainly participate in activity 1.1.4, 1.2.1, 1.2.3, 1.3.1, 1.4.2, 1.5.3 and 1.6.1. Tropical wood products enterprises, including domestic enterprises and foreign companies in joint-venture or independent venture, will mainly participate in activity 1.1.4, 1.2.3 and 1.5.3. 17

Tropical wood products traders, including domestic traders and some multinational corporations who are eager to access Chinese market, will mainly participate in activity 1.1.4, 1.4.2 and 1.5.3. Large domestic forest products markets which play an important role in tropical wood products distribution, will mainly participate in activity 1.3.1, 1.3.2, 1.5.3 and 1.6.1. End consumers of tropical wood products will mainly participate in activity 1.3.2. Just as mentioned above, the outputs of the project will be useful for target beneficiaries, for example, the research report is helpful for Chinese and foreign competent authorities, relevant industrial societies and enterprises undertaking tropical forest product operation to have sufficient understanding of supply and demand of China s tropical forest product markets, thus they could have a basis to follow when they implement macro management, formulate policies and make decisions. The reference materials, including analysis reports, investigation report and newsletters, are also helpful for domestic tropical forest product producers and traders choose cooperative partners and make feasible marketing strategies. iv)project sustainability At present, forest products market and international trade is one of the most important research fields of Research Institute of Forestry Policy and Information (RIFPI), CAF. With the establishment of Center for International Forest Product Trade of SFA in implementing institute, SFA has allocated related projects to RIFPI, which ensure the sustainability of market information collection and trade database. Through implementing the project, project team has established close relationship with some foreign research institutes, such as CENTRAFOR of University of Washington, Forest Products Laboratory of USA, proposal on forecasting model of forest product will be proposed for future further cooperation. At the same time, the project team will continue to keep information exchange with them, so as to distribute updating North American market information to domestic stakeholders, because North American is one of the most export market for China. In addition, the capacity of the ITTO supported Tropical Forest Product Information and Consultation Center of China has been further enhanced, its resource and information 18

base is expanded, its links with stakeholders become closer and closer. All these have laid a good foundation for future following up research on market of tropical wood products in China. 5. Assessment and Analysis i)project rationale and project identification process As a follow up of the ITTO project PD 25/96 Rev.2(M)(1997-1998), China s Consumption of Forest Products and Its Demand for Them from the International Tropical Forest Products Market by the Year 2010, a good foundation had been laid for developing the Project. When preparing the Project proposal, we had gone through a very through process of literature search and surveys to gain insight into the changes in forest products market over the past decade. At the same time, we consulted different stakeholders to solicit their contributions to the proposal, including Forest Products Statistic Division of State Forestry Administration, Customs, National Timber Distribution Association, National Forest Industry Association, and some enterprises such as Krono (Beijing) Wood Based Panel/Flooring Co. Ltd. The rationale had been well researched and project activities formulated with inputs from stakeholders. Some international agencies, such as GFTN of WWF and TNC had also contributed to the process. ii)the results of the identification process From the realized Project performance and outcome, it can be seen that the Project had been adequately designed through the correct definition of problems, the accurate identification of project objectives, and the viable choice of implementation strategy. At the same time, the identification process is closely linked to different stakeholders, this ensure the Project is able to create impacts to the right target beneficiaries. iii)critical differences According to the project document, the project duration was 24 months. Actual project duration is 29 months after 5 months extension due to waiting for new annual official data and the official release of Twelfth Five-Year Development Plan (2011-2015) for forest sectors. 2011 is called a plan year in China because it is the beginning year for the Twelfth Five-Year Development Plan. Related industries which have impacts on demand and supply of timber developed their official Five-Year Plans in 2011. These plans were 19

released in the early half of 2012 and provided important references for revising and polishing the final project reports. iv)time and project inputs As mentioned above, there is five months extension for the project duration. It is better if the ending date is in the midterm. During the project implementation, executive agency gave great support on personnel and equipment, financial resources, data resource etc. Project team members are actively responsible in their roles and stakeholders actively contribute support to the project when necessary. ITTO manager and international consultant also provided valuable comments and ideas during project implementation. Therefore, project inputs are adequate. v)external influences, assumptions and risks There was little external influence that had impacted on the successful completion of this project except for the delay release of official data and plan (refer to section iii). The executive agency through previous projects in this field have established good working relationships with government organs (such as the Ministry of Commerce) and its commercial institutions abroad, the SFA, GAC and National Bureau of Statistics in order to collect materials. In addition, Center for International Forest Product Trade of SFA which affiliated to the executive agency provides a broad platform for further cooperation with different stakeholders. All these can mitigate the risks of failure in collaboration with many domestic and international institutions. vi)project beneficiaries As mentioned in section 4 above, beneficiaries took active part in project activities. The research reports of the project are helpful for target beneficiaries to get clear understanding of the situation and future trend of supply and demand of wood products market, which will provide bases to the relevant authorities for their decision making, as well as provide important market information to ITTO member countries. The newsletter reported relevant information on Chinese wood products market timely. It is an effective way to ensure effective communication and information exchange among beneficiaries, especially to establish close relationship with forest industry associations and typical enterprises to keep abreast of new development on production and demands of forest products. The following two tables show the main benefits which the project can provide for direct and indirect beneficiaries through publishing reports and newsletters, holding 20

seminars and workshops, conducting market survey and enterprises investigations etc. The project s direct beneficiaries China s policy making forestry and international authorities Domestic companies, enterprises and trading markets engaging in tropical forest product trade and operation Domestic companies and enterprises engaging in tropical forest product production and processing International companies and enterprises engaging in tropical forest product trade with China International companies and enterprises engaging in tropical forest product production and processing Benefits from the project Get references for making wood products market policies to achieve the balance between demand and supply Get market information for making sound marketing strategies Select the right international partners and expand trade in wood products from sustainably managed sources Learn more on the production, demand and trade situation of Chinese tropical wood products market and development trends in 2020, which is helpful to make future production plan. Access to market information for making sound marketing strategies Get opportunities to participate in decision making process of developing forest industry plan Learn more on the production, demand and trade situation of Chinese tropical wood products market and development trends in 2020 Get market information for making sound marketing strategies Find Chinese partners Learn more on demand and trade situation of Chinese tropical wood products market and development trends in 2020 Get market information for making sound production strategies The project s indirect beneficiaries Domestic organizations of government and industry in charge of forest product production, trade, supply and circulation Benefits from the project Get references to adjust existing management 21

Consumers of tropical wood products Domestic research and teaching institutions Government agencies and industrial and trade organizations in China (eg. representative office) for ITTO member countries who engage in the trade of wood products with China Relevant international organizations such as ITTO, FAO, UNECE, WWF and WB Know more information on forest products market Get more information on China s forest products market, it is helpful for future research and teaching Get sufficient understanding of supply and demand of China s tropical forest product markets, which provides a basis to follow when they implement macro management, formulate policies and make decisions. Get sufficient understanding of supply and demand of China s tropical forest product markets, it is good for their future projects in China vii)project sustainability The sustainability of the project had been discussed in section 4. Almost all stakeholders were of the opinion that this Project should be continued. Several government authorities had express their interest in participating in the following activities since China plays an increasing important role in the global processing and trading chain of tropical wood products. With the new trends of international trade of forest products, such as Lacey Act and EU timber regulation, Chinese forest industry faces severe challenges from export market. At the same time, new domestic market structure will be established during the Twelfth Five-Year Development Plan (2011-2015). It is necessary to continue the research on forest products market to understand its changes and future trends. Considering that China has become the international center of manufacture, consumption and trade of wood products in the world, the depth studies on Chinese forest products market will greatly contribute to the sustainable development of global wood products market. 6. Lessons Learned a) Project identification and design matters Driven by both domestic consumption and export demand, the demand for timber, especially log and sawnwood, increased sharply in last decades. Up to now China is the largest log import country. In 2006, before the project was implemented China s log imports reached 32.15 million m3, up over 200 percent from 1998. It is estimated that 22

China s consumption of wood products would increase at annual rate of 15 percent. It is of significance to forecast demand and supply of wood products in China in foreseeable future. Therefore, the project identification is of great importance. In addition, while developing the project proposal, the Executing Agency had completed a market survey and the results were discussed during a few stakeholders meetings. The views and suggestions gathered from these discussions and consultations were valuable inputs for developing the proposal. The very thorough project designing and planning process contributed a lot to the smooth execution of project activities. b) Operational matters Collaboration with stakeholders is very important. During implementing the project, the project team had been keeping close contacts with stakeholders, such as statistical institutions, forest authorities, industrial associations, manufactures and customs, etc. Without assistances of these stakeholders market surveys would not have been done successfully. At the same time, close collaboration with stakeholders also ensure the timeliness of the execution of project activities and enhance further overall quality and quantity of the outputs. The information correspondents from key consumer provinces of tropical wood products played important role in collecting data and market surveys. The project engaged 12 correspondents who provided project team with information and data on tropical wood products in China timely during implementation of project. These information is very useful for editing the newsletter China s Forest Products Information as well as for writing project reports. The international consultant played an important role in framework design and finalization of project technical report. According to project document, an international consultant will be hire to assistant project team to accomplish project work. In the light of that the United States is the most important trade partner of China in wood products as well as its mother tong is English, the project invited an American professor from the Center for International Trade of Forest Products, University of Washington as the project consultant. The international consultant is an expert in model who came to China and worked together with project team for two weeks and worked back in USA for another two weeks to assist project team to finalize the technical reports. The consultant is very conscientious and made a due contribution to the project. Consultations with international organizations were founded to be beneficial to the planning and execution of this project. TNC, which carried out a RAFT (Responsible Asia 23

Forestry and Trade) project in China, WWF and Rainforest Alliance etc. had provided constructive comments which directly and indirectly enhanced the overall planning and execution of this project. Keeping regular communication with foreign research institute, ITTO, beside the scheduled project Technical Committee Meetings, has provide crucial guidance to implement the project and manage all related activities. The international workshop served as a platform for professionals and stakeholders to exchange information in the field of wood product markets. The international workshop entitled Perspective on Global Tropical Wood Products Market: Potential and Challenge was successfully organized in October, 2011 in Beijing. About Sixty participants from home and abroad attended the workshop. The participants shared information on global tropical wood product markets from presentations by participants from international organizations and different countries. Documenting the outputs of the project by compiling and publishing newsletters provided the necessary profile uplifting for the project. These newsletters and posters prepared by the Executing Agency had been distributed through the Center for International Forest Product Trade of SFA, as well as during regional and international events such as the Asia - Pacific Forest Week (Beijing, 2011) and XXIII IUFRO World Congress (Seoul 2010). 7. Conclusions and Recommendations i)conclusions and recommendations The project, PD 480/07 Rev.2 (M) Demand and Supply of Tropical Wood Products in China Towards 2020, was approved at the 44th ITTO Council session in Yokohama in 2008. The project, which was a follow up to ITTO PD 25/96 Rev.2(M), was aimed at improving the supply of tropical wood products from sustainably managed forests to Chinese market and promoting sustainable development of global wood products trade. The project analyzed the timber situation in China with a focus on tropical timber to increase market transparency in China. Major project activities and outputs included data collection, analysis and preparation of interim reports were completed to achieve this objective. Outreach activities included publishing and disseminating China s Forest Products Market Information, and holding seminars and an international workshop. A newly-created forecasting model for the supply and demand of tropical wood products in China, and questionnaires for enterprises and consumers were developed for the project. 24

This final report of this project contains information and materials on tropical wood production, consumption and trade that had been collected for analysis and compilation. A consulting meeting was held to collect stakeholders opinions and suggestions, and formed part of the analysis. Two separate analysis reports and an investigation report, including the analysis reports on the productive capacity of Chinese tropical wood processing enterprises and the end uses of the imported tropical log were finalized and used to develop this final report. Through forecasting timber demands from different consuming sectors (end uses), such as wood-based panel sector, pulp and paper sector, wood furniture sector, infrastructure construction sector, construction, decorating, repair and remodeling sector, and other timber consuming sectors, the total demand for industrial timber in China (excluding waste paper, branch wood, small-diameter logs and processing residues) was estimated to be 601 million m 3 for 2020 in log equivalent. Regarding timber supply capacity of domestic forest resources, the timber supply potential is estimated at 463-473 million m 3 in log equivalent for 2020. Using the dynamic model, which was established using a comprehensive analysis of factors affecting tropical timber supply and demand, the development trend of tropical timber supply and demand was forecasted and analyzed using mathematical software. It was forecasted that China s tropical timber supply would be 8.22 million m 3 and the demand will be 20.61 million m 3, so the gap would be 12.39 million m 3 in 2020. It is clear that there will still be big gap between timber supply and demand in 2020. Chapter 6 of final report presents policy recommendations in order to alleviate the conflicts between supply and demand of tropical timber. In general, the project activities were conducted successfully and contributed important findings through effective project design and inputs. The conclusions and recommendations are summarized as below: Identification China is one of the largest countries in production, consumption and trade of tropical wood products. With the rapid development of national economy and fast increase of people s living standards, China s demands for tropical wood products will continue to increase and this will certainly affect word timber markets. Therefore it is of great importance to analyze and forecast future demand and supply of China s tropical wood 25