China expands overseas interests in forestry, primary and secondary wood processing; investment in private, state enterprises in 20 countries estimated at US$3.1B, focus is shifting to woodland leases, strategic alliances
March 5, 2014
(International Tropical Timber Organization (ITTO))
– The pattern of overseas investment and cooperation by Chinese timber enterprises is evolving rapidly.
Chinese forestry enterprises have invested around US$1.3 billion in some 20 countries mainly for timber harvesting, primary processing as well as a growing interest in wood product manufacturing.
In addition to a diversification of target investment there has been an evolution in the type of enterprises involved which now includes private as well as state enterprises.
In the past most overseas ventures involved direct investment but this is now changing and more deals to purchase or lease woodland are being made and more of these business arrangements involve share acquisitions, joint ventures, capital injections and other forms of strategic alliances.
As Chinese overseas investment expands it must mature and the government has been assisting through providing guidance and in building collaboration between government, banks and the enterprises.
However, the government admits challenges still exist. Firstly, government regulations need to be more focused and timber association support to overseas investors needs to be strengthened. Secondly, the inexperience of Chinese enterprises to assess and deal with risks in the international market need to be addressed.
To enhance the “Go Global” initiative the government intends to foster greater international competitiveness and strengthen management in Chinese enterprises to encourage the creation of respected multinational companies with an international reputation and influence.
One key area of concern of government is the strengthening of industry self-regulation. In the process of fighting against illegal logging and associated trade, enterprises are key players and the government and industry associations need to strengthen their guidance and emphasise integrity and social responsibility.
It is recognized that there needs to be more effort put into raising an awareness of global issues and a sense of responsibility in enterprises.
Source: Tropical Timber Market Report, International Tropical Timber Organization, Yokohama, Japan.