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Analysis and New Developments on the Chinese
Hardwood Market
Prepared For European Hardwood Conference
November 3-4, 2005 Paris - France
Li Hongfan
China Wood International, Inc Beijing, China
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Presentation Outline

• Market overview of the last 5 years on China
  lumbers and logs consumption and imports
• China Timber Consumption by geography
• Chinese import duty for log and lumber import
• Reasons and analysis for the Oak beech
  Tropical hardwood consumption in China
• China Wood processing industry and its fit for
  European hardwood
• Doing business in China

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Part 1 Market overview of the last 5 years on
China Logs and lumbers consumption and imports
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Application field of commercial timber in
China During 1998-2004 (million cbm)
Source SFA
Nearly 109.84 million cbm timber were used in
Construction and Decoration industry, sharing 48
of total timber used. Timber Application
percentage in Paper was increased from 8.4 (9
million cbm) in 1998 to 33(75.39 million cbm) in
2004.
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China is the only developing country among the
top 12 wood product importers in the world.
Source Global Trade Atlas

• China was the 4th largest import market for wood
  products in 2004, with total imports of US5.2
  billion.
• In 2005 H1, China surpassed the UK to become the
  3rd largest market.

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China accounted for 26 of global imports of
hardwood logs in 2004, and 2005 will be another
new record volume.

Jan-August 2005 sourcing changes Malaysia
-25 African -6 Russia
25 PNG 42 Myanmar 28 Gabon
8.5 Solomon Is 42 Germany 44

• First 8 month of 2005, Russia has surpassed
  Malaysia to become the leading supplier.
• African supply -6, but imports from USA 30
  and Europe 67.

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China Hardwood Lumbers Domestic Consumption
Import during last five years.




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China Worlds largest market for hardwood
lumber, with 21 of global imports in 2004


Leading Hardwood suppliers 2005e
Jan-Aug 2005 change in Volume Myanmar 50
Indonesia - 24 USA 7 Russia
- 6 Malaysia 5 Brazil - 22
1000 cbm 1000 cbm
Thailand 810 Myanmar 355
USA 797 Brazil 229
Indonesia 739 Russia 156
Malaysia 451 Germany 78

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China Hardwood Lumbers Domestic Consumption
Import during last five years



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Part 2 China Main Timber Consumption by
geography
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(No Transcript)
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• Demand from Domestic Consumption
• v Inshore Area
• Middle West area
• Beijing 2008 Olympic Games Shanghai 2010 World
  Expo
• Demand from Increasing wood products exports from
  China to International markets
• Solid Wood Production Centers
• The North China Wood industrial areas
• The South China wood industrial center
• The East China industrial area
• The Northeast China industrial areas

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(No Transcript)
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Part 3 Chinese Import duty rules for log and
lumber import
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Logs and Lumber Zero Import duty makes China more
logs and lumber import while not prefer to
processed products.

• The policy of having zero import duties on logs
  and lumber while maintaining import duties on
  more processed products
• Heavy investment in infrastructure to facilitate
  imports.
• Imported wood products used to produce furniture
  or wood products for export are also exempt from
  VAT for producers operating in a tax-free zone.
• Opening up the import trade so that there are
  now probably one thousand companies or more
  involved in importing logs and lumber.

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• More Logs import than Lumber import in China
• Because of different dimensions and grades on
  lumbers between China overseas suppliers,
  Chinese company would like to import more logs
  while not lumber.
• Chinese company prefers to import logs for
  rotary or slice for thinner veneer to produce
  veneer faced wood products, while not import
  veneer directly because of different veneer
  grades, to lower the cost.
• Better usage of logs than lumber. Chinese
  companies normally would like to widely use the
  logs imported in different parts of products to
  reduce the high raw material cost.

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Part 4 Reasons and analysis for Beech Oak
Tropical Hardwood import changes in China
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China Oak import increased 72.97 by logs and
45.57 by lumber in first half 2005, compared
with the same period of 2004.



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China Beech Imports decreased 6.78 by logs and
26.09 by lumber in this first half year,
compared with 2004.



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China Tropical Hardwood Log Lumber Import
during 2000-2004


Main suppliers of tropical hardwood logs are
Malaysia, PNG, Gabon, Myanmar, and Indonesia,
etc While Indonesia , Malaysia, Brazil,
Thailand are the main suppliers of tropical
lumber.

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Market Demand Makes the species import changing !

• Decoration is alike fashion, every year change
  the style, so species using on panel will be
  changed according to the market demand.
• Before 2000, Beech faced panel used for interior
  decoration was quite popular in China, so plywood
  factories consumed many Beech logs and veneer,
  and now the market has happened great change,
  customers would rather like many types hardwood
  other than Beech.
• Beech face panel using for decoration is not
  good for painting, the color can be changed after
  years, which makes clients unhappy.
• After 2000, Chinese customers imported lots of
  Beech from France for many Beech logs were blew
  down by hurricane, but the quality is not good,
  so many users complained to Beech species and
  changed to utilize other hard species.

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Market Demand Makes the species import changing !
(cont.)

• Increasing demand from domestic consumption and
  exporting on Oak species, used for Oak flooring
  and furniture, even for Oak face panel for
  decoration.
• Most wood flooring companies produce flooring
  with many kinds of hardwood, the species mainly
  from SE Asia, S. America, Africa, some from
  Europe and N. America, like Oak, but seldom with
  Beech, very few manufacturers produce Beech
  flooring.
• Increase import from Russia on hardwood species
  (Oak, birch, ash, etc) and strong promotion
  activities from NA in China make more Oak import.

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Part 5 China Wood Processing industry and Its
fit for European Hardwood
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China Furniture Production Export

• 80 of furniture production in China are made
  of solid wood and wood-based panel.
• Wood furniture shares 30 of total China
  furniture export
• During last 8 years, China wood furniture
  export increased 19 every year in volume, and
  28 in value.

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China Furniture Production

• The total number of furniture firms is above
  50,000. among which generally are small and
  medium firms. The number of employees of
  furniture industry is 5 million now.
• The furniture industry is heavily dependent on
  imported wood to support the production,
  including
• -- Hardwood lumber from North America,
  Southeast Asia, Russia, and Europe.
• -- Hardwood logs from Russia, Southeast
  Asia, Africa, and to a much lesser extent Europe
  (mostly Germany).
• -- Softwood logs and lumber from Russia and
  to a much lesser extent New Zealand.
• Species from USA are Red Oak, White Oak,
  Walnut, Cherry, Maple, and from Russia are mainly
  Birch, Ash, Elm, Basswood, and etc.

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China is largest wood flooring producers
consumers
Main species used Domestic Ash, Chinese oak,
elm, basswood Imported from Russia, Africa, and
South America

• Chinas flooring production shares 50 of
  total production volume in the world.
• There are 4000 solid wood flooring
  manufactures, and its estimated 1/3 middle-small
  scale solid wood flooring producers will stop
  production because of higher price of raw
  material in 2005 2006.
• There are more than 100 engineered flooring
  manufactures with certain scales in China.

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Part 6 Doing Business with Chinese
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Find good and suitable local Agent is very
important in exploring China markets!

• Sector magazines/journals/newsletters/newspaper
• Association meetings
• Industrial exhibitions
• Seminars for customers
• Sector administration offices (ministerial,
  provincial, municipal)
• State Technology Supervising and Testing Centers

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Part 7 Actual and Future Trends of the Chinese
Market
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Future Trends

• Hardwood import keeps growing, but increase speed
  is reducing for the growing of softwood import
• Oak import increase more than other species
• Beech import is appearing the reduction trend
• Low grade and cheap beech for furniture is
  accepted
• Softwood demand increase
• Engineering wood development
• Fast growing wood supply increase (poplar,
  eucalyptus)

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China Wood International Trade Service Center
China Wood International, Inc Beijing Xiangfei
Market Investigation Co., Ltd
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Company Profile
China Wood International, Inc, Beijing
Xiangfei Market Investigation Co., Ltd is in the
business of providing services for China wood
products international trade and
internationalization of Chinese enterprises, with
more than 10 years experience in the wood
industry. We construct a brand new China
Wood International Trade Service Center for
industry players both from domestic and overseas,
by setting up and continuously perfecting China
wood international enterprise database and
China wood international media platform along
with professional perspective, marketing strategy
and honest spirit.
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Service and products

• Market research
• form core competitiveness
  advantage
• Various media market promotion platform
• Conference service
• incorporate excellent company to
  make
• great achievements
• Business consulting
• concentrate on industry service,
  discern
• companys trend

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1-1 Market research consulting - service 1

• Single client consulting report
• Providing information consulting and market
  investigation services for China and the
  international forest products industry.
• China Wood Products Distribution Study report
• China Tools Markets and Its Fit For XXXXX
• World Forest Resource Report
• China Plywood Industry Report

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1-2 Market research consulting - service 2
Multi-client consulting report Firmly
sticking to latest development of wood industry
and market demand, we draw up the study report in
industry development, distributing the latest
multi-client market study report throughout the
world.
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2 Great Internet Paper Media platform

• www.chinawood.org is a bilingual web site with
  more than 12,000 registered members. Our web site
  is viewed over 420,000 times every week, covering
  global wood industry.
• International Wood Industry Magazine is
  published in English and Chinese, distributed
  throughout world, which is a professional media
  focused on international timber and wood products
  trade .
• CHINA WOOD MONTHLY MARKET REPORT , an English
  version newsletter, has more than 1,000 overseas
  readers, distributed throughout world.

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2-1 Media 1 Magazine International Wood
industry
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2-2 Media 2 B2B website www.chinawood.net
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2-3 Media 3 Newsletter China
Wood Monthly Market Report
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3. Industry Conference
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3-1 Conference service 1 Annual international
trade conference on timber and wood products

• Annually China WOOD Markets Export Import
  Conference is one of the most important industry
  events focused on promoting international timber
  and wood products trade between Chinese and
  overseas companies, starting from 2002 year. This
  is a great platform for overseas companies to
  meet qualified suppliers as well as potential
  buyers.

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3-2 Conference service 2International trade
conference focused on specialized products
It is international trade conference focused
on specialized products (plywood in 2004, and
flooring in 2005), organized normally every
spring.
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Achievements 7 international conferences during
4 years

• 2002 China Wood Export Import Conference on
  March 10-12 in Beijing
• 2002 Sino-Russia Wood Trade Investment
  Conference on November 17-18 in Beijing
• 2003 China Wood Export Import Conference on
  October 28-30 in Shanghai
• 2004 China Plywood Trade Investment Conference
  on April 28-29 in Pizhou
• 2004 China Wood Markets Export Import
  Conference on October 26-29 in Dalian
• 2005 China Wood Flooring Export Import
  Conference in April
• 2005 China Wood Export Import Conference in
  Guangdong

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conference
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3-3 Conference service 3seminar combined with
exhibitions

• Entrusted by six famous industry exhibition
  organizers (such as WoodMac) every year, we help
  them organize seminars during the exhibition
  opening time, delivering specific industry
  knowledge to exhibitors and visitors.

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4 Business Advisor service

• Providing market investigation service about
  China for foreign company.
• Providing industry tours organization service for
  foreign company.
• Organizing business tour to abroad for domestic
  company periodically.
• servicing as an industry agent, inspector or
  headhunter based on customer requirements.

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Achievements business tour

• 2000 international wood trade investigation tour
• Organizing wood trade investigation tour for
  Tennessee, USA
• Organizing domestic enterpriser to investigate
  North American market
• Organizing Forest Machine Investigation Tour
  for Finland cooperated with Finland embassy
• Organizing Sino-Russian Wood Trade Investment
  tour with American International Forest
  Resources Inc.
• Successful tour for China wood products export
  United State
• Plywood purchase research tour in Jiangsu
  Zhejiang areas for American purchasers
• Chinas market research for American hardwood
  supplier
• Organizing investigation tour of log and plywood
  purchase in northeast China for foreign clients.

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5-1 Achievements Import Export Directory

• China Wood Export Directory in Chinese
• China Wood Export Directory plywood section
  in both Chinese and English
• China Wood Export Directory wooden flooring
  Section in English
• World Timber Raw Material Purchase Directory in
  both English and Chinese.

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Achievements China Wood Import Export
Directory
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Global Timber Material Buyers Guide

• The buyers Guide is a crucial directory,
  which efficiently introduce timber suppliers to
  Chinese buyers.
• If you join it
• you will enter the database on our website
  browsed every day by our members
• you will be read by our 15,000 members
• you will become our member free for one year to
  contact our members directly
• Standard charge is 500USD, half page(177119mm)
  with your introduction, address, contact person,
  Tel/fax, email/website and pictures, please
  browse www.chinawood.net.

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Service mission
Providing service for China Wood Products
International Trade and Internationalization of
Chinese Enterprises
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Service advantage

• With years experiences in high quality annual
  wood international conference with a great number
  of world famous company participated, we provide
  you the best platform to promote your business in
  china.

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Service advantage

• Having more than ten years experience of
  consulting and investigation work, we could
  assist you get better knowledge in China Wood
  Industry.

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Service advantage

• Our media, covering a large range of industry,
  can help your company build a perfect company
  image.

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Thank you! China Wood International, Inc
Mr. Hongfan Li Mark Stone Tel
(86)10-8235-7166 ext 818 Fax
(86)10-8235-8546 Email hongfan_at_chinawood.org