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Fear that the Chinese will cut down all of Siberia’s mighty forests is a very popular notion in Russia right now. Almost everyone, from activist bloggers to the major tabloids, has written about this in recent months. Debates on the issue have been raging online for several years, and thousands of people in Siberia’s Irkutsk and Krasnoyarsk regions have signed petitions against the Chinese “takeover” of the Siberian taiga, advocating for a complete ban on Russian timber exports to China.
China is one of the largest furniture suppliers to the global market, and its domestic wood product market is also growing rapidly as the standard of living there improves. As a result, China has gradually become a world leader in unprocessed timber imports, accounting for 16.6 percent of global imports in 2017.
According to Chinese statistics, Russia is the country’s number one timber supplier, accounting for 30 percent of Chinese timber and lumber imports, followed by New Zealand with 13.8 percent, while Canada and the United States each supply 9.8 percent. New Zealand traditionally provides round timber, while North America ships timber-processing products like cellulose, paper, and pulp. Russian timber exports to China have undergone an interesting change in the last ten years, in part thanks to restrictions on round timber exports, which were introduced long before the environmentalists started to sound the alarm about the Chinese threat to the Siberian forests.
In 2007, the Russian government imposed new tariffs on unprocessed timber exports, increasing duties from 6.5 to 20 percent, and then to 25 percent a year later. In some cases, unprocessed timber duties can be as high as 80 percent. The Russian authorities believed that the increase in customs fees would spur investment (predominantly foreign) in the domestic timber-processing industry, while lawmakers sought to buttress budget revenues.
The new rules led to a 30 percent decline in the volume of Russian timber exports to China from 2007 to 2009. The total volume of Chinese imports continued to increase, however: Russian timber was soon replaced by New Zealand shipments.
But Chinese business retained a keen interest in Russian timber, even in the face of the new tariffs. After all, Russia has ample forests in close proximity to China: Russia’s Siberia and Far East regions are the largest timber exporters to China (they account for 41 percent of all Russian timber). But after the draconian round-timber tariffs, minimally processed timber started playing a more dominant role in Russian exports to China, and now accounts for 62 percent of all timber exports. In 2017, round timber comprised just 35 percent of Russian timber shipments to China.
This export shift has a reason. The tariff for minimally processed timber is much lower—only 10 percent (starting at 5 euros per one cubic meter). The Chinese forestry business successfully adjusted to the new circumstances: instead of importing expensive round timber, it started migrating to Russia, setting up sawmills there, and exporting the much cheaper minimally processed timber. If in 2008 there were only 152 Chinese forestry companies in Russia, today this number has reached 564. These companies are often leading employers in Siberia and the Far East, but use only Chinese forestry equipment.
There is a notion in Russia that logging is completely banned on China’s territory, and that therefore the Chinese forestry companies are exploiting Siberian forests instead. But this is not completely true. Indeed, the large-scale industrialization of the past decades has brought China to an ecological disaster, so in recent years rebuilding the “green civilization” is one of Beijing’s biggest priorities, and the authorities put serious restrictions on logging activities. But still, the Chinese authorities are allowing the logging of 5.08 billion cubic meters of timber through 2020, though commercial logging (2.8 billion cubic meters) will only be allowed at man-made forests. So, Beijing currently officially allows the logging of about 1 billion cubic meters of timber per year, which is three times more than any peak imports from Russia.
Raising the tariffs on round timber exports wasn’t the only timber reform Russia undertook back in 2007: it also gave its forestry regulations a major overhaul. Regional governments are now responsible for the preservation of Russian forests. A consequence of this is that local officials are prepared to approve even the most ecologically unsound projects to fulfill their KPIs on attracting Chinese investment to their regions.
The Amazar Pulp and Saw Mill, for example, was being built in the Zabaikalsky region exclusively through Chinese investments. The project got underway in 2005 with support from the local government of the region’s main city, Chita. In December 2017, it was even included in the priority program for the development of Zabaikalsky border territories.
At the final stage of construction, however, it turned out that the pulp and saw mill poses a serious threat to the region’s environment: the region simply doesn’t have enough timber to feed the mill (the project calls for the production of 2 million cubic meters of timber a year). In addition, the Amazar River dam built for the needs of the mill blocks fish migration routes and disrupts the river’s life cycle. Environmentalists started protesting back in 2013, and Chinese investors finally withdrew from the project five years later—after investing $360 million in it—largely because of the environmental activists’ protests.
The new Forest Code that came into force in 2007 effectively eliminated the system of state forest protection, and the number of professional forest rangers significantly declined. This contributed to the deterioration of forest management. Wood chips and sawdust are no longer removed after trees are felled, which increases the risk of fires (a wave of forest fires peaked in the summer of 2010 and left the Russian capital blanketed in thick smog).
In addition, illegal logging is on the rise, and due to lack of financing, forest rangers increasingly turn a blind eye to it. Chinese companies often enlist the services of these individuals, which has caused outrage in Russia. Illegal logging violates forest management regulations, leading to deforestation and fires, but is almost impossible to monitor, since it often takes place in remote locations.
These problems are exacerbated by corruption at the borders. Illegally harvested timber can easily be cleared through the Russian border, and paperwork procured to export even old-growth Siberian pine. But so far, public ire is directed at the Chinese entrepreneurs rather than Russian officials, although the former simply take advantage of the opportunities that the Russian business climate affords them.
Environmentalists note that one of Russia’s main problems is a consumerist approach to forests, which is also reflected in legislation. According to Greenpeace Russia activist Alexey Yaroshenko, the Forest Code pays little attention to forest renewal, and the taiga is viewed as a “log mine.” Indeed, the scale of forest renewal in Russia leaves much to be desired. In 2016, newly planted Russian forests covered an area of 0.78 million hectares, while China managed to renew its forests across 28 million hectares.
Russia is not the only country in whose forestry industry the Chinese are active. Chinese businesses’ behavior largely depends on the degree of control exercised by the local authorities, and forestry is a great illustration of this.
While the local authorities in African countries like Zambia, Congo, and Mozambique—China’s biggest rosewood suppliers—and some Russian regions ignore the issue of illegal logging, New Zealand, which requires Chinese companies to buy logging licenses approved by the central government, makes Chinese business activities an important issue at regional elections. Only large companies can afford to buy a license, so there are no small Chinese businesses operating in New Zealand. Instead, there is China Forestry Group Corporation (CFGC), created with the direct involvement of China’s State Forestry Administration.
CFGC New Zealand employs New Zealanders at the executive level, and the company is actively expanding its educational grant program for locals with the aim of further developing trade relations between Beijing and Wellington. Local authorities appear to strictly monitor Chinese investors: for instance, the Wairarapa regional administration got into a tussle with a Chinese farmer over him blocking public access to the forest, in violation of the rules set by the New Zealand Walking Access Commission.
New Zealand’s elaborate logging licensing system, as well as its monitoring of even minor violations, ensures the virtual absence of environmental problems. Forest renewal programs are also actively implemented there at the government level, which offsets large-scale deforestation. The forestry industry is a state priority in New Zealand, and Chinese business plays by the rules set by local governments—just as it does in Russia.
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
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