United States Department of
Foreign Agricultural Service
China Could Offer A Growing Market
For U.S. Wood Exports
Ag Exporter Magazine, March
by Eric Trachtenberg, Forest
Products Division, FAS
For the U.S. forest products industry, China's time
may be coming - again. After years of decline - from a peak of $448 million in
1988 to a low of $28 million in 1995 - U.S. wood product exports rose more
than 20 percent in 1996 to $34 million.
The composition of U.S. wood exports to China has changed dramatically over
the years. Most of the decline came from falling sales of softwood logs (which
made up 98 percent of U.S.
exports in 1988) caused by competition from other exporters and China's trade
policy regime. Most of the recent growth has stemmed from vigorous sales of
hardwood logs, lumber and veneer.
Softwood logs accounted for $13.2
million (just 23 percent) of U.S.
exports in 1996, and stiff competition from New Zealand will likely constrain
future sales. Hardwood logs and lumber made up $8.3 million of U.S. exports in
January-September 1996, up over 50 percent from the same period a year earlier.
China's forest resources have come under
increasing pressure as the country's economy develops and its population
expands. Mature stands of timber are growing scarce: forests cover only 330.4
million acres (13.9 percent) of China's
The country's economy has
averaged 13 percent annual growth since the late 1980's, which has helped
generate an increasing - and increasingly prosperous - middle class. Thanks to
its beauty, versatility and workability, wood tends to be preferred for
upgrading home and business interiors.
Product Prospects Surge
The market for lumber, paneling,
furniture and other products continues to expand, spurred by rising consumer
demand for higher-quality housing and better furniture, and renovations of
business and tourist facilities. While most of the growth has been concentrated
in coastal provinces, demand also is climbing in other regions.
The interior decoration market
will likely grow rapidly because rising personal incomes have given consumers
the means to improve their homes with wood products. Although sales of higher-cost
woods like ash, maple, cherry and oak will eventually expand,
incomes must increase sharply to bring these choices within the reach of most
Chinese prefer hardwood furniture
because of its handsomeness and durability; about a third of China's total
wood use goes for furniture production. But even
relatively well-off Chinese still buy laminated furniture built around
particleboard because of its ready availability and low cost. Furniture tastes
vary between generations: younger people like modern designs, while older ones
prefer traditional pieces.
Panel product imports are used in construction and furniture. Panel products are used in making furniture (including cabinetry for
stereos and TV's) and interiors (mainly walls and floors).
The market for wood products for
structural applications remains relatively weak because of the effects of China's wood
substitution policy, which encouraged use of materials such as concrete, metal
and plastic. Window frames and doors are just two examples of products once
made of wood and now constructed of other materials.
On the other hand, wood housing, often
favored by expatriates, could provide a market niche for 2-by-4 lumber.
Bowling alleys could create an
important market for U.S. wood;
it's estimated that 3,000 bowling lanes are under
construction in Shanghai
Market Outlets Boost Sales
One-stop shopping for the
home and do-it-yourself projects have come to China, further fueling demand for
wood products. In 1996, Home Way,
a store modeled after Home Depot, opened its doors in Tianjin. The company plans to build a chain
of stores across China.
Ten large cities now have "furniture
cities" - areas full of stores with furniture and other merchandise spread
over a colossal 10,000 square meters of floor space. More such outlets are planned in coming years.
Some Hurdles Remain
A number of factors limit
China's market for U.S. wood
products. Chinese importers note that U.S.
products generally cost more than either domestic items or imports from
Southeast Asia and Africa, which has led to
widespread use of products from these regions in flooring, paneling and
Confusion surrounds the issue of
wood quotas continue to restrict trade. Some trade and government representatives
believe that quotas have been lifted; others maintain
that quotas have been set so high that they no longer impede trade.
China continues to limit the right to import
wood products to licensed firms, although several factors alleviate the full
force of this restriction. Reportedly, many joint ventures and Taiwan sole proprietorships import products for
resale in China,
and some Chinese companies with licenses import products for other firms. Nevertheless,
in regions lacking a strong commercial infrastructure, import license
requirements can effectively bar imports, particularly in the minor markets of
the interior provinces.
China has many middlemen
in its distribution system, and each charges 12-15 percent of the product price
for reselling. Markups can add 50 percent to the import price.