China's unique opportunity to tackle deforestation

China plays an important role in international forest governance. It is the largest importer of soy, beef and forest products and the second-largest importer of palm oil. The global value chains of these four soft commodities are responsible for at least 40% of global deforestation. As a major importer and consumer of soft commodities, China plays a pivotal role in the global soft commodity value chain. Through the UN’s Biodiversity Conference (COP15) presidency, China has a unique opportunity to combat global deforestation. At last November’s COP26 climate conference in Glasgow, China committed itself to work alongside 140 governments to reverse global deforestation by 2030.

How will the world’s second largest economy turn words into action?

A new report by the Tropical Forest Alliance (TFA) and the World Economic Forum looks to answer this question.

Over the past 20 years, incomes and consumer demand in China have risen in equal measure. To meet the growing demand for timber, China’s domestic production grew by 50% from 1998-2018. These are sourced mainly from new plantation forests. Over the same period, forest product imports have grown over six times to 300 million cubic metres in roundwood equivalent (RWE) – more than triple the volume China either produces itself or exports (see Figure 1).

About two-thirds of the world's tropical logs were exported to China in 2018. A report published in 2019 by Global Witness finds, however, that some of the countries exporting timber to China can do more to combat illegal logging. While China’s domestic and export timber industries are well-regulated, Chinese regulations on imported timber are vague or non-binding.

China’s principal export timber market has passed measures to address the import of products containing illegal timber. These measures include the European Union’s Forest Law Enforcement, Governance and Trade (FLEGT) action plan in 2003, the US Lacey Act Amendment in 2008 and the EU Timber Regulation in 2013. In November 2021, the European Commission proposed a new Regulation on deforestation-free products, which could have a significant impact on supply chains for wood, soy, beef, palm oil, cocoa and coffee. China has also signed agreements on sustainable forest governance with Indonesia, US, EU, UK, Japan, Australia, and others.

In 2000, China initiated a forest protection programme, which it extended to a full commercial logging ban in all natural forests by 2017. To meet China’s soaring demand, log and sawnwood imports have accelerated, overtaking domestic timber production in 2014. The closest measure to combat this has been China’s Timber Legality Verification System (CTLVS). CTLVS requires importers to evaluate and mitigate illegal timber-sourcing risks. To date, 63 enterprises have adopted this voluntary group standard. With this system being voluntary, it is unlikely to be effective.

In 2019, the Chinese government introduced major revisions to the Forest Law, which forbids any enterprise or individual from handling timber they know to be “illegally or indiscriminately felled”. The law applies to domestically produced timber and isn’t clear on the obligation it may place on importers. Given the huge volume of China’s timber imports, this issue urgently needs addressing.

In 2009, the Chinese government published guidelines on sustainable forest management for enterprises doing business overseas. In Gabon – which shipped 900,000 tonnes of tropical timber to China in 2018 – a dozen Chinese companies managing nearly 40% of the country’s forests adopted these guidelines. This has contributed to an increase in forest cover in Gabon from 85.4% to 90.8%.

Stimulating market demand is a key driver of forest certification. Multinationals like IKEA have promised to preferentially purchase certified raw wood materials and products – helping to promote the market development of forest certification in China. Global Forest and Trade Network (GFTN) China has played a key role in persuading corporate forest operators to apply for Forest Stewardship Council (FSC) certification for over 2.6 million hectares in China and 400,000 hectares of forest in the Amazon. In 2017, COFCO International (China’s largest food trader), committed to stop deforestation in its soybean and palm oil supply chains. At COP26 COFCO signed the Agricultural Commodity Companies Corporate Statement of Purpose, in which 12 global companies pledged to “halting forest loss associated with agricultural commodity production and trade”.

Similarly, business-focused alliances in China are influential in driving change at home, particularly in supply chains that support the real estate, forest products and paper industries.

In light of China’s commitment to curb deforestation, its ongoing presidency of the UN’s Biodiversity Conference, the promotion of a green Belt and Road Initiative, and an ambition to create an ecological civilization, it is uniquely positioned to tackle deforestation.

China can take tangible steps to reverse the huge ecological impacts of soft commodities in the countries that export to it. In many cases, these countries already have their own laws, policies and commitments to tackle deforestation. By seeking to uphold these standards among trading partners, China will enhance its own standing as a responsible global power.

Greening the global trade in timber and soft commodities will help protect the planet while strengthening the resilience of China’s supply chains and food security. So too, it will align its export businesses with markets rapidly regulating markets like the EU.

A twin-track approach that combines regulations with incentives will prove most successful. There are four areas where the China could drive positive change: