Global Emerging Market Opportunities for

Structural and Other Softwood Products

 

A Market Study report for the American Forest & Paper Association

 

 

INTERIM DRAFT

 

 

 

 

 

Paul Boardman

Director, CINTRAFOR

 

Dr. Ivan Eastin,

Associate Professor & Assistant Director, CINTRAFOR

 

Dr. John Perez-Garcia

Associate Professor, CINTRAFOR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Center for International Trade in Forest Products

College of Forest Resources, University of Washington

Box 352100

Seattle, WA  98195-2100


Table of Contents

 

Page

1.     China: Opportunities and Obstacles. 1

1.1       Introduction/Background. 1

1.2       Housing Market Assessment 19

1.3       Opportunities/Constraints. 25

2.     Thailand: Opportunities and Obstacles. 39

2.1       Introduction/Background. 39

2.2       Housing Market Assessment 44

2.3       Opportunities and Constraints. 47

3.     Opportunities for Structural Softwood Lumber in the Philippines. 58

3.1       Introduction/Background. 58

3.2       Housing Market Assessment 61

3.3       Opportunities and Constraints. 63

4.     El Salvador. 66

4.1       Introduction/Background. 66

4.2       Housing Market Assessment 66

4.3       Opportunities and Constraints. 67

5.     Panama. 69

5.1       Introduction. 69

5.2       Housing Market Assessment 69

5.3       Opportunities and Constraints. 69

6.     Opportunities for Structural Softwood Lumber in India. 71

6.1       Introduction/background. 71

6.2       Housing Market Assessment 75

6.3       Opportunities and Constraints. 76


1.         China: Opportunities and Obstacles

1.1       Introduction/Background

National Economy

Text Box:  
    Source: China Statistical Yearbook 2001

China’s rapid economic development over the past twenty or so years has lifted millions out of severe poverty and propelled many into extraordinary wealth.  China has emerged from virtual isolation to become the seventh largest trading nation and the sixth largest economy in the world.  Following Deng Xiaoping’s reinstatement in the late 1970s, the central government initiated a set of reforms that completely revitalized the country’s economy, integrating it into the world economy. In 1978 China was almost completely autarkic, engaging in trade with only its closest neighbors and political allies.  Today, trade accounts for nearly fifty percent of China’s Gross Domestic Product (GDP); imports from the United States have grown from nearly zero to almost $20 billion in value.  In 2001, China’s GDP reached close to $1.13 trillion.  Although annual economic growth during this period had been somewhat inconsistent and heavily affected by domestic political policies or trends, it has generally remained greater than 5% for the past decade.  Growth in 2001 remained strong at over 7%.

 


While much larger increases have occurred in coastal areas, national per capita GDP increased from $46 to $860 between 1978 and 2000, and average incomes are projected to reach US $954 by the end of 2002.

 

China’s reforms, targeted initially only at the agricultural sector, were later extended to industry and are now – as the country evolves into its membership in the World Trade Organization (WTO) – gaining momentum in the services sector.  China’s leaders have stressed a gradual and somewhat piecemeal reform process in order to avoid large, sweeping, and fast-paced restructuring that could potentially result in economic and social instability, not to mention potential political upheaval.  Although Premier Zhu Rongji’s style in the late 1990s had been less consensual and stressed more rapid reforms than that of Premier Zhao Ziyang in the 1980s, China has managed to avoid extending its reforms to the political system and related governing institutions. It has been what Barry Naughton calls “institutionally conservative,” whereby the center has avoided dramatically replacing institutions and processes, instead slowly restructuring existing ones to enable the economy to eventually “grow out of the plan.” 

 

The Chinese expression “groping for stones while crossing the river” has epitomized the reform era and the government’s experimentation process, attempting different policies at the local level and eventually officially adopting at the center those that seem to work best.  Unfortunately, this has also meant that reform has been uneven and some areas, like the eastern coast, have experienced significantly more economic growth than others, such as the inner western provinces.

 

China’s leaders are committed to integrating the country into the global economy and are well poised to continue down such a path.  2001 was an auspicious year for creating momentum in reforms and opening the country up to the rest of the world.  China’s capital city, Beijing, won its Olympic bid for the summer 2008 games; the country became a member of the World Trade Organization (WTO); and Shanghai successfully hosted the APEC summit in the fall.  Even in the face of the global slowdown after September 11, the country was still able to maintain an officially reported 7.6% economic growth rate during the last quarter of 2001 and a 7.8% growth rate during the first half of 2002.  As China grows, so do the wants and demands of its consumers; consumption patterns in China are beginning to look more and more like those of a developed country

 

The next year will signal a new era for China as its leadership changes hands.  President Jiang Zemin is to step down at the 16th Party Congress in November of 2002, and will likely be replaced by his successor, current Vice-President Hu Jintao. In addition, Li Peng, Chairman of the Standing Committee, and Premier Zhu Rongji are expected to leave their posts within the next few years.  Zhu is expected to be replaced by his protégé, present Vice-Premier Wen Jiabao.  The new leadership will be technocrats, bureaucrats who were trained in science and technology, and who are seemingly more driven by economics than political fervor.  Hu was trained as an engineer, Wen as a geologist.  Hu has very often been described simply as “enigmatic,” in that not much is known about him or his leadership style and how he will perform after taking the reigns from Jiang. 

 

Regardless of Hu’s physical presence, a certain priority for both Hu and Wen will certainly be the preservation of the Communist Party and Beijing’s ability to exert control over the provinces and municipalities.  They will have to do so in the face of increased massive layoffs as the government offloads debt-ridden state-owned enterprises (SOEs) and increased unemployment among peasants. The Chinese Academy of Social Sciences has estimated that China’s unemployment rate could reach as high as 15% in coming years.[1] However, despite some uncertainties in the next generation of the Party’s leadership and concerns over inflated reported growth rates, the outlook for the Chinese economy is generally good. 

Demographics

Population

Despite the crisis and famine of the Great Leap Forward during 1959 to 1961, China’s population has more than doubled from 552 million persons in the early 1950s to over 1.2 billion in 2000.  This is due in large part to the dramatic increase in crude birth rates coupled with a simultaneous drop in crude death rates during the 1960s, creating a nearly 3% population growth.  During the 1970s, however, as a result of stringent government imposed family planning policies, birth rates began to drop off, and by 2000, the government reported actual population growth of just one percent.[2] 

 

Since the introduction of the One Child Per Family Policy, and its predecessor, the “Later-Longer-Fewer,” a policy that encouraged couples to get married later (for women, until they reached 23 in rural areas and 25 in cities), leave longer spacing between children and to have fewer children in total, average household size in China has been reduced to approximately 3.5 persons. It is likely, however, that in many areas, families are underreporting the size of their households in order to avoid fines or punishment for exceeding the one-child quota, a problem that has significant cumulative consequences for tax collection and government-provided services.

 

In 1980, in order to ensure that couples wait to get married, the government increased the minimum marrying age to twenty for all women.  The average marrying age for women in China has increased from 18.7 in 1950 to 20.8 in 1970 and again in 1998 to 23.6.  Unlike many Western countries, almost all women in China marry, and almost all marry by the time they reach the age 30.  Also unlike many Western countries or Japan most women are still having children, even if only one; most Chinese women have their children between the ages 20 and 29. 

 

Text Box:  
         Source: China Statistical Yearbook 2001

In addition to creating “little emperors” (children who are doted upon by their parents and grandparents), there have been a number of more significant unintended side effects of the government’s family planning policies.  First, because in rural areas boys are generally considered critical to maintaining a family’s legacy while girls marry into another family, thereby leaving their own, preferential treatment is generally given to producing boys.  Studies have demonstrated that in lower income families, first-born surviving children are more likely to be boys.[3]  As the post one-child policy generation grows up, men are outnumbering women (some estimates put the ratio at 117 or 125 men for every 100 women) and are finding it increasingly difficult to find women willing to marry them.  These “bare sticks” (those who cannot find wives and are resigned to living alone) are typically of lower-income and peasant origin. 


 


Text Box: Population	Total 	Ratio
	1265.83	100.00%
Rural	807.39	63.78%
Urban	458.44	36.22%
In millions of people	
Source: China Statistical Yearbook 2001
As the generation born in the 1940s and 1950s begins aging, there will be fewer members of a younger generation to care for them and to contribute to the social security system as it currently exists.  Chinese culture has traditionally stressed a strong sense of filial piety, and Chinese offspring have typically cared for their parents in their old age.  As a result, there is no current infrastructure for retirement homes or facilities as found in western countries.  Compounding this problem is that it is socially taboo to not care for your parents, so that developing an adequate infrastructure for elderly care facilities will likely take some time yet to achieve.  Although urban workers have been entitled to pensions, the pension system is virtually bankrupt, making it unlikely that these pensions will cover the costs of caring for the elderly as the century progresses. 

 

Urbanization and Migrant Populations

Although urbanization rates ha