Industry News News
The Bottom Line: China: Market, Competitor, or Both?

“I think the publication does a nice job of boiling down a lot of the information that is available on what we think are the major opportunities and the major threats,” says National Group Leader for the Markets & Economics Group, Chris Gaston. “There are some major global economic trends happening, and China is one of them.”

Gaston was part of an FPInnovations delegation that recently met with representatives from three of China’s key forest products research institutes. This helped to set the stage for a visit by the president of the Chinese Academy of Forestry and an eight-member delegation to Vancouver in December 2007.

Fierce Competitor
No matter what aspect of the Canadian economy a business is involved in, growth in the Chinese economy is having an impact, because China has become the manufacturing centre for the world.

“They are proving to be that in wood products as well,” says Gaston. “They are the largest non-domestic supplier of furniture to the United States, a position long held by Canadian furniture manufacturers, and they are now the largest global trader of plywood and hardwood flooring.”

While the Chinese economic dragon is on the prowl, it has an almost insatiable appetite for resources, and this has been identified in the report as the most immediate opportunity for Canadian wood products.

“There is no way that they are anywhere near to self-sufficiency for wood materials,” says Gaston. “This means there is going to be a strong demand for lesser processed inputs. Is that a bad thing for a supplier country like Canada?”

The per capita demand for wood products in China is expected to increase significantly, and given its 1.4 billion population, this will lead to increased global consumption of wood.

Needs Commodities
The report notes that China’s most immediate wood product needs are for commodities such as pulp, newsprint, and lumber at the right grade and price category. Whether Canada will become a major supplier of these commodities remains to be seen. However, even if countries like Russia meet a major percentage of demand, this is still good news for the Canadian forest industry.

“If the growth in demand for fibre in China soaks up all of the growing supply that is going to come out of Russia, that puts less competitive pressure on us in our big markets, particularly in the United States,” says Gaston.

As China attempts to grapple with its income disparity problem, there will be an increase in demand for rural housing. This represents a significant opportunity for Canadian wood products because of our expertise in wood frame building construction. There are also many second tier, inland cities in China with populations of one million people or more that are creating a demand for higher-end housing.

“There is an amazing amount of development going on in cities other than the Beijing/Shanghai corridor, which gets all the attention,” says Gaston. “I’m really bullish on working with the Chinese in housing because I think we have a lot to offer in helping them to help themselves.” While this may involve the use of a considerable amount of Canadian wood in building systems, it may also involve use of more indigenous wood species, and even bamboo.

In terms of the threat that China poses as a wood product exporter, “in some situations, some sectors have been and will continue to be affected in a big way,” says Gaston. “They are going to have to figure out how to deal with that, including the possibility of outsourcing to China. Our furniture industry is a good example of that. Many of them have chosen to outsource components.”

Wood Market Trends in China follows on the heels of an earlier report released by the Markets & Economics group focused on wood market trends in Japan. A third report, analyzing wood market trends in Europe will be available in electronic format by the end of the year.