ABSTRACT

This report explores some of the opportunities for, and challenges associated with, exporting wood products

to China. Five topics are examined: an overview of trends in forestry and forest products in China, export

opportunities and challenges for U.S. primary wood producers (Study 1), export opportunities and challenges for

U.S. secondary wood producers (Study 2), relevant barriers to trade, and a compilation of state export resources.

This work is based on observations from three trade missions to China (March 2004, March 2005, and July 2006),

interviews with persons knowledgeable with hardwood markets in China, and two surveys of Chinese forest

products business groups.

ABOUT THE AUTHORS

• SCOTT BOWE is an Associate Professor and Wood Products Specialist at the University of Wisconsin-Madison.

• MATT BUMGARDNER is a Forest Products Technologist with the U.S. Forest Service, Northern Research

Station, Princeton, West Virginia.

• TERRY MACE is a Utilization and Marketing Specialist, Division of Forestry, Wisconsin Department of Natural

Resources, Madison, Wisconsin.

Published By:

U.S. Forest Service

11 Campus Boulevard, Suite 200

Newton Square, PA 19073-3294

November 2008

The use of trade, firm, or corporation names in this publication is for the information and convenience of the reader.

Such use does not constitute an official endorsement or approval by the U.S. Department of Agriculture or the Forest

Service of any product or service to the exclusion of others that may be suitable.

For Additional Copies:

U.S. Forest Service

Publications Distribution

359 Main Road

Delaware, OH 43015-8640

Fax: (704) 368-0152

ACKNOWLEDGMENTS

• The work upon which this publication is based was funded in whole or in part through a grant awarded by

the Wood Education and Resource Center, Northeastern Area State and Private Forestry, Forest Service, U.S.

Department of Agriculture.

• Technical support was provided by Hongmei Gu, owner of B-One Technology Consulting Company in

Madison, Wisconsin.

• The authors would also like to thank Paul Swenson for his invaluable assistance with our three trade missions

to China and subsequent data collection. Paul Swenson is Director, Council of Great Lakes Governors, Shared

China Trade Office, Shanghai, China • www.TheChinaHand.com

Visit our homepage at: www.nrs.fs.fed.us
FORESTRY AND FOREST PRODUCTS IN CHINA

CHINA’S FOREST RESOURCE AND

WOOD RAW MATERIALS

Forests covered 174.9 million hectares in China in 2003,

according to the State Forestry Administration, accounting

for 18.2 percent of the country’s land area. This represents

a gain of more than 52 million hectares since the mid-1970s

when forest cover was 12.7 percent. Further, China’s

forest stocking volume totaled 12.5 billion m3 in 2003

(Jiang 2007). Since the implementation of economic

reforms in 1978, China’s economy has grown at an

unprecedented rate. As a result, China imports large

volumes of wood raw material to satisfy its growing

demand as domestic production falls far short of

demand. Total industrial consumption of roundwood

was 310 million m3 in 2004, but national timber

production was only 52 million m3 (Jiang 2007).

In 2004, China imported 7.3 million m3 of tropical

logs, making it the world’s largest importer of such logs.

Malaysia, Papua New Guinea, Gabon, Myanmar, and the

Republic of Congo were the primary sources. Further,

China also imported 19 million m3 of temperate logs

with Russia providing the bulk of this volume. China

also is the world’s largest importer of tropical sawn

wood, accounting for almost 3 million m3 or 27 percent

of all tropical sawn wood imports worldwide in 2004

(International Tropical Timber Organization 2006b).

By contrast, approximately 1.2 million m3 of temperate

hardwood lumber was imported by China in 2004 (Petry

and Qing 2007).

1

A recent study of Chinese import trends since the 1990s

showed that forest products are increasingly entering

the country in less processed states as more value is

being added to the products by Chinese manufacturers.

Examples ranged from increased log imports to boost

domestic plywood production to increased pulp imports

to support more paper production, all at the expense of

finished plywood and paper imports (White et al. 2006).

Logs and lumber are China’s most rapidly growing

primary import segments (Table 1) (Zhu 2006).

Table 1.—China import volumes (1,000 m3) of primary

wood products, 2000 and 2004 (Zhu 2006)

Percent

Product 2000 2004 change

Softwood logs 6,397 15,962 149.5

Hardwood logs 7,215 10,282 42.6

Sawn hardwood 3,168 4,304 35.9

Sawn softwood 468 1,700 263.2

Plywood 1,003 780 -22.2

Veneer 650 223 -65.7

Specialty burl veneer being produced by a Chinese

manufacturer from imported logs. Photo used with permission

of Terry Mace, Division of Forestry, Wisconsin Department

of Natural Resources.
2

CHINA’S WOOD PRODUCTS

PRODUCTION AND TRADE

China’s wood products manufacturing industry is large,

diverse, and growing rapidly. China realized a trade surplus

in forest products for the first time in 2005, when exports

rose by 29 percent from 2004 to $20 billion; imports

increased by just 8 percent to $18 billion (International

Tropical Timber Organization 2006a). In 2006, the value

of China’s forest industry output was $146 billion1, a

26 percent increase from 2005. Of this total, the value

of the primary industry came to $64.5 billion, up eight

percent from 2005. The value of the secondary forestry

industry was $71.2 billion, exceeding the primary forestry

industry for the first time, a 49 percent increase from 2005

(Global Wood 2007). Other examples of growth include

the output of wood-based panels, such as plywood,

fiberboard, and particleboard, which increased 8 percent,

20 percent, and 46 percent, respectively, from 2005

to 2006 (Global Wood 2007). The output of China’s

wood flooring industry was 292 million m2 in 2005, up

18 percent from 2004. Of this total, solid composite

flooring accounted for 46 million m2 (40 percent increase),

laminated flooring was 190 million m2 (20 percent increase),

bamboo flooring was 6 million m2 (20 percent increase),

and solid flooring was 50 million m2 (30 percent decrease)

(Global Wood 2006). Wood consumption by industrial

application is shown in Table 2; construction and paper

production consumes the largest quantities (Zhu 2006).

China’s wood products industry remains a diverse mixture

of establishments, ranging in size from very large

production lines to small-scale enterprises to handicraft

shops; smaller facilities represent the majority of firms

in the industry (Petry and Qing 2007). Many of the

largest furniture companies provide dormitory-style

housing for their employees in areas where housing is

not readily available.

FORESTRY AND FOREST PRODUCTS IN CHINA

1All currency values in this report are reported in United States

dollars unless specified otherwise.

Table 2.—Chinese wood consumption by application and

quantity (1,000 m3), 2004 (Zhu 2006)

Application Quantity Percent of total

Paper 96,800 32.8

Construction 63,500 21.5

Agriculture 40,000 13.6

Furniture 26,500 9.0

Export 18,900 6.4

Pit/mine prop 11,000 3.7

Other 38,300 13.0

A small hardwood flooring operation in China. Photo used with

permission of Scott Bowe, University of Wisconsin-Madison.

Hand-carved banisters produced at a very small Chinese

workshop. Photo used with permission of Terry Mace, Division

of Forestry, Wisconsin Department of Natural Resources.
3

FORESTRY AND FOREST PRODUCTS IN CHINA

China has become the largest furniture producer and

exporter in the world (Petry and Qing 2007). Annual

gross output of furniture increased from $9.5 billion in

1997 to $25 billion in 2003, an average annual increase

of 17 percent; exported furniture shipments increased a

staggering 560 percent during the same period, reaching

$7.3 billion in 2003 (Cao et al. 2004). More recent reports

put the value of China’s furniture exports at $13.8 billion

in 2005, with about one-third being wood furniture

(Butterworth and Lei 2006). Even though China is

the world’s largest exporter of furniture, more than

70 percent of the gross output of furniture in China

was consumed by the domestic Chinese market in 2002

(Cao et al. 2004), and this trend has continued to the

present (Petry and Qing 2007).

Dormitory housing at a large Chinese furniture factory. Photo

used with permission of Terry Mace, Division of Forestry,

Wisconsin Department of Natural Resources.

China’s main solid wood products exports by value are

furniture and panel products, mostly plywood (Table 3)

(Wagner 2007). Relying largely on China’s low labor and

operational costs (Cao et al. 2004), there is a focus on

production and export of more labor intensive and

processed products. In the first quarter of 2007,

exports of wooden furniture grew to 60.4 million

pieces ($2.2 billion in value), a 36.7 percent increase

from the same period in 2006. Nearly half ($1.1 billion)

of these furniture exports went to the United States, with

about $0.2 billion each going to Hong Kong SAR, the

United Kingdom, Japan, and Canada (International

Tropical Timber Organization 2007).

Table 3.—China export value (million dollars) of solid

wood products by type, 2006 (Wagner 2007)

Percent

Product Value of total

Furniture 3,427 53.3

Plywood/fiberboard 1,126 17.5

Construction related (joinery, carpentry,

flooring, marquetry) 819 12.7

Lumber/rough wood 137 2.1

Other wood products 920 14.3

Furniture on display in the showroom of a Chinese manufacturing

plant. This style of furniture is quite ornate with detailed

carvings and is well made. This group was targeted for the

European market. Photo used with permission of Scott Bowe,

University of Wisconsin-Madison.
FORESTRY AND FOREST PRODUCTS IN CHINA

4

Predictions place the Chinese middle class at 40 percent

of their population by 2020 (Hardwood Review 2007).

Housing data for China can be inconsistent. Some sources

show there were 24 million new housing starts in 2005,

based upon an average residence size of 80 m2 (Braden

2006). As a comparison of relative market size, the United

States had about 2.1 million housing starts in 2005 (U.S.

Census Bureau n.d.a), with an average size of 226 m2 for

single-family units and 116 m2 for multifamily units (U.S.

Census Bureau n.d.b). Other sources suggest 10 to 12

million housing starts annually in China (Boardman 2006)

or 16 to 18 million starts (Butterworth and Lei 2006).

Despite the data inconsistencies, the major point is

that the scope and scale of the housing market in China

is enormous.

In addition, the Chinese government is focusing on

the development of rural areas. There are 700 million

peasants living in rural China; the standard of living in

rural areas is very low by western standards and represents

a large and undeveloped market. It is predicted that there

will be rapid development in rural areas of China in the

coming years–a huge potential market for wood products.

Tower cranes at numerous construction sites like these fill the skylines in China’s major cities, creating potential markets for wood

furnishings and fixtures. Photo used with permission of Terry Mace, Division of Forestry, Wisconsin Department of Natural Resources.

CHINA’S POTENTIAL DOMESTIC

MARKET FOR WOOD PRODUCTS

In addition to China’s rapidly expanding wood-export

sector, the domestic market for wood products also is

growing. Rapid economic growth and the deregulation

of the housing sector in China have expanded the interior

decoration and furnishings market. Development and

construction projects are common scenes in China’s

large- and medium-sized cities. The intense domestic

competition in the furniture and decoration business in

recent years and the dramatic changes in consumption

patterns have pushed up the demand for wood products.

Rapid economic growth and remarkable housing

expansion have created a new generation of increasingly

affluent, savvy consumers who are eager to outfit

their living space with quality interior decoration and

furnishings, potentially made with U.S. hardwoods.

For example, it is estimated that China’s middle class

(families with assets of $18,072 to $36,144) comprises

about 20 percent of the population. This translates into

about 250 million people, a number equal to about

85 percent of the population of the entire United States.
5

STUDY 1: OPPORTUNITIES AND CHALLENGES

FOR PRIMARY PRODUCERS2

INTRODUCTION

In recent years, United States domestic production of

secondary wood products has declined due to the shift

to offshore production facilities, such as those found in

China (Schuler and Buehlmann 2003). As production has

moved offshore, these producers have sourced hardwood

lumber from countries across the globe. Domestic lumber

producers need to participate in these markets to remain

competitive in the global marketplace. Exports account

for approximately 10 percent of all hardwood lumber

produced in the United States (Hardwood Market Report

2005) and China is an important destination. According

to data from the U.S. Census Bureau3, China (including

Hong Kong) accounted for approximately 19 percent

by volume and 15 percent by value of United States

hardwood lumber exports in 2004. The major species

breakdown of this volume is as follows: red alder (Alnus

rubra), 22 percent; yellow-poplar (Liriodendron tulipifera),

19 percent; oaks (Quercus spp.), 17 percent; and maples

(Acer spp.), 9 percent.

Domestic hardwood lumber producers need a better

understanding of how these foreign markets operate.

For example, U.S. suppliers learned early on that Chinese

buyers purchase lumber mostly on price and not on grade

(Barford 2004). In other words, U.S. suppliers have to

determine the proper mix of grades to include in a

shipment to meet the specified price.

The United States is generally a high-cost source in a

global context, which potentially puts its producers at

a comparative disadvantage (Butterworth and Lei 2005)

and also puts pressure on profit margins. For example,

the average nominal price of United States hardwood

lumber exported to Asia has declined in recent years

as China, following a low production cost model, has

become the major market in the region. In contrast,

average nominal price to Europe has increased

(Bumgardner and Hansen 2001).

There is limited market channel and product information

available on hardwood lumber markets in China. In this

study, we have taken initial steps to profile hardwood

lumber market channels in China, providing much

needed information for companies that seek to be

competitive in the global marketplace. Understanding

this information will give U.S. hardwood lumber exporters

an advantage in the Chinese market. The primary objectives

were to identify the primary market channels through

which hardwood lumber flows into the Chinese

manufacturing sector and to determine the hardwood

lumber specifications imported by Chinese wood

manufacturing firms.

A wood market in southern China. Photo used with permission

of Scott Bowe, University of Wisconsin-Madison.

2This section is based in part on a study conducted in 2005 by

authors of this publication (Bowe et al. 2007).

3Assessed from lumber export database (available from the

authors) maintained by the U.S. Forest Service, Princeton, WV.
STUDY 1: OPPORTUNITIES AND CHALLENGES

FOR PRIMARY PRODUCERS

6

STUDY DESCRIPTION

Data were collected utilizing a written questionnaire and

short interviews using intercept procedures and on-site

interviews. The questionnaire development and data

collection procedures are described below.

The questionnaire was developed with the assistance

of persons familiar with the hardwood lumber export

industry, including personnel from the University of

Wisconsin, the U.S. Forest Service, the Wisconsin

Department of Natural Resources, and the Council

of Great Lakes Governors in Shanghai, China. The

questions were designed to collect information on

import channels within the Chinese wood manufacturing

industry. Questions covered the following topics related

to hardwood lumber purchases: volume, grade, species,

country of origin, and types of sales agent used. The

questionnaire fit on one page, front and back, and was

designed to facilitate efficiency of data collection and

respondent cooperation.

A native Chinese-speaking wood scientist at the University

of Minnesota translated the English questionnaire into

Mandarin Chinese. The translated questionnaire was

pretested in China with Chinese business representatives

familiar with the hardwood lumber industry. Minor

translation changes were made to improve understanding.

Data were collected during short personal interviews with

hardwood lumber-using firms. The primary data collection

points during the trade mission (March 2005) occurred

during three industry trade shows: the China Famous

Furniture Trade Show in Dongguan, the International

Construction & Decorative Material Exhibition in Dalian,

and the China 2005 WoodMac-FurniTeck-WoodBuild

International Exhibition in Shanghai. During the

shows, the trade delegation maintained exhibition space

representing the Lake States Lumber Association; most of

the data collection occurred from these exhibition spaces.

In addition, four interviews were completed during

company tours in the cities of Dongguan and Dalian.

These tours were organized with the assistance of

the Dongguan Furniture Association and the Dalian

Furniture Association.

Native Chinese speakers from the staff of the Council of

Great Lakes Governors and the University of Minnesota

conducted the interviews and recorded the information on

the survey form. Interviews typically lasted five minutes

or less. Company presidents or production managers were

targeted for the interviews. During the trade shows, these

individuals were identified by their trade show name badges

and through business card exchanges.

Responding Firms

Forty-five companies participated in the survey.

Two questionnaires were incomplete resulting in

43 usable responses.

The types of companies sampled used hardwood

lumber in some component of their business. Furniture

manufacturers represented 30 percent (n=13) of the

respondents, followed by lumber brokers at 26 percent

(n=11), flooring companies at 12 percent (n=5), and

wood markets at 12 percent (n=5). Wood markets in

China can best be described as a shopping mall for wood.

Individual wholesalers lease garage-like space and sell raw

materials to local wood manufacturers. Lumber, veneer,

panel products, and other wood materials are available,

with much of the stock imported.

Twenty-one percent (n=9) of the respondents indicated

other business types. These businesses included veneer,

cabinet, window, and door manufacturers. In addition,

three of the furniture manufacturers indicated that they

also brokered hardwood lumber as a part of their business.
7

STUDY 1: OPPORTUNITIES AND CHALLENGES

FOR PRIMARY PRODUCERS

Geographic Distribution

of Responding Firms

China consists of 23 provinces, five autonomous regions,

four municipalities, and two special administrative regions

(Fig. 1). Study participants had facilities located in eight

provinces, one municipality, and one special administrative

region (Table 4). The largest numbers of responses were

from Shanghai and Guangdong, likely due to the primary

data collection point at the trade shows in those regions

and the large concentration of wood manufacturers in the

Guangdong province.

Responding Firms’ Representative

Respondents representing the participating firms included

sales managers (37 percent, n=16), company presidents

(30 percent, n=13), lumber buyers (12 percent, n=5), and

production managers (9 percent, n=4). Other company

representatives (12 percent, n=5) included positions

such as general managers, inspectors, and engineering

personnel. Several respondents held multiple positions

within their company. These types of respondents would

be knowledgeable of their company’s overall hardwood

lumber purchases and use.

Table 4.—Location of responding firms

Location Number of facilities Location Number of facilities Location Number of facilities

Shanghai 17 Guangdong 13 Liaoning 4

Zhejiang 3 Hong Kong 3 Hebei 2

Jiangsu 2 Jilin 2 Shandong 2

Taiwan 1

Figure 1.—China map with respondent locations shaded and major ports indicated.
STUDY 1: OPPORTUNITIES AND CHALLENGES

FOR PRIMARY PRODUCERS

8

LESSONS LEARNED

Hardwood Lumber Consumption

and Sources

Annual hardwood lumber consumption in 2004 for

all responding firms was 1.5 million m3 (665 million

board feet). Median hardwood lumber volume used by

respondent firms was 5,380 m3 (2.4 million board feet),

and the mean was 38,700 m3 (17.4 million board feet).

Table 5 shows lumber use by company type; the means

and medians for each company type are similar with the

exception of furniture, where two very large firms skewed

the mean (with these two firms removed, the mean was

5,851 m3 and the median was 3,000 m3).

Respondents were asked what proportion of their

hardwood lumber came from the United States. The

median imported volume was 33.0 percent, while the

mean imported volume was 38.7 percent. Other sources

suggest that China imports approximately 10 to 20

percent of its hardwood lumber from the United States

(Barford 2004, American Hardwood Export Council

2005). Imports of U.S. hardwood lumber ranged from

zero to 100 percent with 32 percent (n=12) of the

responding firms purchasing no lumber from the United

States and 18 percent (n=7) purchasing 90 percent or

more of their hardwood lumber from the United States.

When asked to rank the top three countries supplying

their hardwood lumber, the United States was ranked

number one by 18 of the responding companies and fell

into the top three rankings 24 times (Table 6). A scoring

system was used where a first ranking = 3 points, second

ranking = 2 points, and third ranking = 1 point. Under

this system, the United States scored nearly three times

higher than the next country, Russia. Russia, Africa4,

and Germany also ranked within the top three at least six

times and showed correspondingly high scores (Table 6).

4 Some respondents reported specific countries while others

reported general regions.

Table 5.—Hardwood lumber use by company type, 2004

Company type Mean Median

Furniture manufacturers 124,700 m3 4,000 m3

(n=10) (56,120,000 bd ft) (1,800,000 bd ft)

Lumber brokers (n=11) 7,364 m3 5,760 m3

(3,314,000 bd ft) (2,592,000 bd ft)

Wood markets (n=4) 5,375 m3 5,750 m3

(2,419,000 bd ft) (2,588,000 bd ft)

Other (n=13) 9,429 m3 6,480 m3

(4,243,000 bd ft) (2,916,000 bd ft)

Table 6.—Top hardwood lumber sources by country/region

First Second Third

Country/region sourcea source source Scoreb

United States 18 1 5 61

Russia 6 2 - 22

Brazil 3 2 - 13

Germany 1 4 1 12

Indonesia 2 2 1 11

Africa 1 2 3 10

Canada 1 3 1 10

Southeast Asia 2 1 1 9

Europe 1 2 - 7

New Zealand 1 1 2 7

Malaysia - 3 17

Thailand 1 1 1 6

Burma 1 - 14

China 1 - - 3

Romania 1 - - 3

South America - 1 1 3

Austria - 1 - 2

Chile - 1 - 2

France - 1 - 2

Gabon - - 2 2

Ukraine - 1 - 2

Korea - - 1 1

a For first, second and third choice, n=40, n=29 and n=21, respectively.

b Based on first=3 points, second=2 points, third=1 point.
9

STUDY 1: OPPORTUNITIES AND CHALLENGES

FOR PRIMARY PRODUCERS

Examples of U.S. hardwood lumber exported to a wood market

in China. Photo used with permission of Terry Mace, Division

of Forestry, Wisconsin Department of Natural Resources.

Hardwood Lumber Import Channels

The hardwood lumber import channels used by the

Chinese manufacturers are described in Table 7. The top

three channels were mainland Chinese brokers, Chinese

wood markets, and direct from United States manufacturers,

which captured 60 percent of the responses when

combined. Chinese brokers and Chinese wood markets

serve as channel intermediaries between the raw material

country of origin and the Chinese wood manufacturers.

Thirty-six of the respondents reported the percentages of

their hardwood lumber purchases that moved through the

various import channels. As shown in Table 7, 39 percent

(n=13) of the respondents purchase exclusively through

one channel, the remaining 61 percent (n=22) purchase

their hardwood lumber through two or more channels.

Primary ports of entry were numerous. The respondents

identified more than 15 port cities. Shanghai and Hong

Kong were cited most frequently, representing a combined

42 percent of the responses. The primary ports of entry

into China are Hong Kong, Shanghai, and Dalian (Fig. 1).

Table 7.—Hardwood lumber import channels for

Chinese manufacturers

Frequency

of exclusive

Channel Frequency purchases

Mainland Chinese broker 16 2

Chinese wood market 15 2

Direct from U.S. manufacturer 15 3

U.S. broker 8 2

Taiwanese broker 8 1

Japanese broker 1 -

Other 14 3
STUDY 1: OPPORTUNITIES AND CHALLENGES

FOR PRIMARY PRODUCERS

10

that more defects were allowable in the FAS grade than were

actually the case. None of the 18 respondents providing

data for this question selected the “many” category.

Given this apparent lack of understanding of NHLA

grading rules, we were interested in learning if the

respondents believed that they had received subgrade

lumber from the United States. Eighteen of 24 respondents

answering this question indicated that they had received

shipments of subgrade lumber. When asked what percentage

of the shipment was downgraded, the median response

was 10 percent and answers ranged from three percent to

20 percent. Due to the inherent variability in hardwood

lumber and judgment of the lumber grader, NHLA

grading rules allow for 5 percent variation in the value

of the shipment before the unit is considered misgraded.

On several occasions, anecdotal evidence from wood market

tours during the trade missions suggested possible confusion

regarding United States lumber grades. In one example,

we found clear defect-free hardwood boards, which were

too narrow and too short to qualify for the FAS grade;

however, the sales agent insisted that the lumber was FAS.

Table 8.—Hardwood lumber grades imported from the

United States

Frequency of

NHLA grade Frequency exclusive purchases

FAS 14 3

Select 5 2

#1 Common 14 1

#2 Common 9 -

#3 Common 1 -

Special grades 1 -

Hardwood Lumber Grades Imported

from the United States

The hardwood lumber grades imported from the United

States are described in Table 8. The top two grades were

Firsts and Seconds (FAS) and #1 Common, representing

the highest frequency by the respondents. This is contrary

to other reports, which cite the Chinese preference for

lower grade (and price) hardwood lumber (Barford 2004).

Regarding special grades, several respondents identified

dimension parts as a “grade” that they were interested in

buying. For example, dimension of 20 mm x 108 mm x

910 mm (0.79 in x 4.25 in x 35.8 in) would be used as

flooring blanks and be machined into a solid hardwood

flooring product.

The hardwood lumber grading rules developed and

implemented by the National Hardwood Lumber

Association (NHLA), though voluntary, are complex

(National Hardwood Lumber Association 2003).

Questions were included within the survey to ascertain

the level of understanding of the NHLA grade rules.

We collected data about the respondents’ understanding of

minimum width, minimum length, and allowable defects

of grade FAS boards. According to the NHLA rules, the

minimum width is 15.2 cm (6.0 in) and the minimum length

is 2.4 m (8.0 ft). Only one respondent closely identified the

minimum width, stating 15 cm (5.9 in) with the median

response being much smaller at 10 cm (3.9 in) (Table 9).

Only one respondent correctly identified the minimum

length of 2.4 m (8.0 ft). The remaining respondents were

closer on the length with several listing values close to 2.4 m

(8.0 ft). The median for the minimum length responses

was 2.0 m (6.6 ft), lower than the actual rule.

Regarding allowable defects within the FAS grade, a simple

categorical scale of “none,” “very few,” “some,” and

“many” was included. The first three categories, “none,”

“very few,” and “some” were selected one, nine, and eight

times, respectively. The relatively high occurrence of the

“some” category may indicate that the respondents believed

Table 9.—Respondents’ knowledge of NHLA FAS grade rules

Respondents Respondents

Dimension FAS rule (median) (range)

Minimum width 15.2 cm 10.0 cm 2.5 cm to 35.5 cm

(6.0 in) (3.9 in) (1.0 in to 14.0 in)

Minimum length 2.4 m 2.0 m 0.3 m to 4.0 m

(8.0 ft) (6.6 ft) (1.0 ft to 13.1 ft)
11

STUDY 1: OPPORTUNITIES AND CHALLENGES

FOR PRIMARY PRODUCERS

Major Hardwood Lumber Species

Respondents were asked to indicate the top three species

of hardwood lumber imported and the country or region

of origin for each of these species. The results are

described in Table 10. Oak was the most frequently cited

species, including red and white oak from the United

States as well as “Chinese” oak from eastern and northern

Asia. Maple also was cited frequently, as was a collection

of tropical and softwood species. Walnut (Juglans spp.)

also was an important species. A number of lesser cited

species included birch (Betula spp.), ash (Fraxinus spp.),

beech (Fagus spp.), alder, yellow-poplar, and cherry (Prunus

spp.). It should be noted, however, that U.S. Census

Bureau data indicate that alder and yellow-poplar are the

two most abundant species exported from the United

States to China. A lone mention of basswood (Tilia spp.)

from Russia was made by a producer of Venetian blinds.

The United States position was particularly strong for oak

and walnut; it also was strong for ash, alder, yellow-poplar,

and cherry, though these species were mentioned less

frequently. This is not surprising given that some of these

species, particularly yellow-poplar, do not occur commercially

on a large scale outside of North America. Interestingly, it

seems there is a fair amount of international competition

associated with maple, even though most commercial maple

production occurs in North America. This could indicate

that channels more complex than “direct from the United

States” are being employed and the ultimate source of

maple lumber is being masked. It also could indicate that

“trade names” sometimes confuse efforts to identify

species botanically (Fig. 2).

Table 10.—Summary of the major species of hardwood

lumber used by respondents and country or region of

origin for each of the speciesa

Number of

Species times cited Country/region of originb

Oak 30 United States (23); Russia (4);

Germany (3); China (2); Europe (1)

Maple 16 United States (10); China (2);

Germany (2); Europe (1);

Russia (1); Korea (1); Indonesia (1)

Tropical 15 Brazil (6); Southeast Asia (3);

speciesc Africa (2); Indonesia (2);

Thailand (2); China (1); Burma (1)

Softwoodsd 11 Russia (3); New Zealand (2);

Canada (2); United States (2);

Austria (1); Chile (1)

Walnut 10 United States (8); Europe (1)

Birch 4 China (3); Russia (1); Germany (1);

Korea (1)

Ash 4 United States (3); China (1)

Beech 4 Germany (2); Romania (1); China (1)

Alder 3 United States (3)

Yellow-poplar 3 United States (3)

Cherry 3 United States (2); Canada (1)

Basswood 1 Russia (1)

a Respondents were asked to indicate the top three species of lumber

used; results presented are aggregated.

b For a given species, this may not sum to “Number of times cited”

because on occasion respondents left country of origin blank, and

some listed multiple countries of origin for some species.

c Includes the following species: “teak” (n=3), rubberwood (Hevea

brasiliensis) (n=2), lapacho (Tabebuia spp.) (n=2), and n=1 each for

okoume (Aucoumea spp.), jatoba (Hymenaea courbaril), kempas

(Koompassia malaccensis), ailanthus (Ailanthus altissima),

sandalwood (Santalum album), “African species,” “tropical species,”

and “hardwood species.”

d Includes the following species: “pine” (Pinus spp.) (n=6), Douglas-fir/

hemlock (Pseudotsuga menziesii Mirb./Tsuga canadensis) (n=2), and

n=1 each for radiata pine (Pinus radiata), southern pine (Pinus spp.),

and tamarack (Larix laricina).
STUDY 1: OPPORTUNITIES AND CHALLENGES

FOR PRIMARY PRODUCERS

12

A “wall” of Russian birch lumber at a Chinese wood market.

Note that this lumber was unloaded and stacked by hand.

Photo used with permission of Scott Bowe, University of

Wisconsin-Madison.

Canada

U.S.A.

Brazil

Chile

EGEND

Countries exporting to China

Gabon

Uk Fr Ro

Au

Ge

Russ

SK

My

Th

ndonesia

ew Zealand

A Austr

rance

G Germany

My Myanmar (Burma)

R Roman

SK South Korea

hailand

kraine

China

Figure 2.—World map with countries cited as hardwood lumber sources for China shaded.

The United States does not seem to be competitive in

terms of birch exports, as sources in eastern and northern

Asia were most common. Additionally, most beech

exports came from Europe. Collectively, tropical species

seem to represent a formidable threat to United States

species, with Brazil and Southeast Asia leading as sources

in this category (note that in addition to “Southeast Asia”

specific Asian countries, such as Indonesia and Thailand,

also are mentioned). Also notable was the collective

presence of softwoods, with North America sharing the

spotlight with Russia and the largely plantation-based

sources of New Zealand and Chile.
13

STUDY 1: OPPORTUNITIES AND CHALLENGES

FOR PRIMARY PRODUCERS

PRIMARY PRODUCER

CASE EXAMPLES

Case 1: Lumber Exports to China

A hardwood lumber producer based in the U.S. Lake

States region aggressively approached the Chinese market

for a 5-year period starting in 2002. This firm has several

large sawmills and significant kiln capacity producing

kiln-dried northern hardwoods. To be successful in

the Chinese lumber market, a company must invest

a significant amount of time and money to develop

potential contacts and foster business relationships. Some

U.S. firms have chosen not to develop a physical presence

in China but rather sell to brokers or wholesalers. Others

have tried to develop an on-the-ground presence in

China and have chosen to hire an agent to represent their

products and interests. An agent may represent only

one firm or several companies at the same time. In this

case, the firm hired a sales agent representing only their

company. Managers from headquarters traveled to

China on a regular basis to meet with the agent and

sales prospects. This brought the face of the company to

China and added validity during sales meetings. Interestingly,

the firm had initially hired an agent that represented more

that one company. After several years of limited success,

they terminated the multiple agent and hired an agent as

a sole representative.

Trade shows have been useful tools in bringing buyers and

the company’s representatives together. In fact, China is

now home to the largest collection of wood industry

trade shows in the world, surpassing European trade

shows in size and attendance. In this case, the firm found

participating in trade shows in Beijing, Guangzhou, and

Dalian to be an especially efficient way to find customers.

Regarding their product mix, this company has had

success exporting hardwood logs and kiln-dried hardwood

lumber to China. Conventional wisdom suggests that the

freight disadvantage from the Lake States region compared

to more coastal states would place northern hardwoods

at a disadvantage. However, this firm has overcome the

freight disadvantage with a species advantage.

Walnut, which has limited commercial growing range

within the United States, makes up a large portion of

their exports in logs and lumber. White oak and red oak

comprises much of their remaining lumber exports.

They have the capability to source southern oak species

to accommodate pricing and margin issues. Although

the endeavor was not profitable for the first years, the

company is now turning a profit in this market. Exporting

lumber and logs to China required commitment, patience,

and a significant investment in time and money.

Case 2: Lumber Exports to China

Another company located in the upper Midwest began

an investigation into the hardwood lumber export market

in China. The company produced green and kiln-dried

hardwood lumber. The firm hired a Chinese national

living in the United States to assist their staff in identifying

markets in China. The Chinese employee had a degree

in forest products from a Chinese university and had

numerous contacts within the Chinese forest products

industry. The management staff and Chinese employee

made several trips to China looking for high-end furniture

manufacturers who desired a higher grade of lumber.

They were targeting this segment with the hope that it

would be less sensitive to the added inland freight costs

and higher cost of northern hardwoods as compared to

southern or Appalachian hardwoods.

After about 6 months the effort was evaluated and they

ended their efforts in China. The company decided that

this market was not a good fit for their company even

though their Chinese employee felt that they where very

close to making sales to some of the high-end furniture

companies that were willing to pay more for the higher

quality northern hardwoods.
STUDY 1: OPPORTUNITIES AND CHALLENGES

FOR PRIMARY PRODUCERS

14

CONCLUSIONS

Primary Products

Even though the data used in this report are preliminary

due to small sample size, several tentative conclusions can

be made. First, the United States faces numerous global

competitors in the Chinese hardwood lumber market.

Countries such as Russia and Brazil, as well as several

from Southeast Asia, were not only cited as sources for

hardwood lumber but also were found to be suppliers

of some of the more common species exported to China.

These imports included a number of tropical species,

which can be used as substitutes for temperate species,

as well as direct competitors to United States temperate

species such as birch, oak, and beech. However, it has

been noted that China is expected to increase imports of

temperate hardwoods due to concerns over the price and

future availability of tropical hardwoods; the United States

is the leading source of temperate hardwoods to China

(Butterworth and Lei 2005).

Second, there are many different channels being used to

move hardwood lumber into China. Direct from United

States manufacturers was found to be a major channel

type, but there were many other channels of similar

importance. The use of brokers and development

of contacts within the Chinese wood market also are

important and suggest that exporting to China can

involve substantial investment in marketing research

and development of selling arrangements.

Third, there seems to be considerable confusion among

Chinese buyers over standard United States hardwood

lumber grades. These buyers appear to be operating more

under a pricing model, not a standard grade model. It

could be that Chinese buyers and United States sellers

are trading under a system with different understanding

of the terminology and with United States sellers doing

what is necessary to remain profitable at pricing levels

demanded by Chinese customers.

More lumber product available at a local wood market in China. Photo used with permission of Scott Bowe, University of

Wisconsin-Madison.
15

STUDY 2: OPPORTUNITIES AND CHALLENGES

FOR SECONDARY PRODUCERS

INTRODUCTION

It is often said of China: The high-end markets are

there, the challenge is to find them! This sentiment seems

supported by demographic data. At the broadest level,

there are 1.3 billion consumers in China. Middle-class

income in China is considered to be about $600 per

month and upper-class income is around $15,000

per year. Further, there are approximately 100 million

people in the upper income categories.5 This seems

consistent with published reports that there are about

25 to 30 million middle-class households in China

with another 8 million affluent homes (University

of Pennsylvania 2006a). About 400 million Chinese live

in urban areas (University of Pennsylvania 2006a);

conversely, there are 700 million peasants and China

remains a country of extremes in purchasing power.

We focus here on opportunities for export of value-added

hardwood products to middle- and high-end market

in China. A Chinese-made oak staircase in a high-end townhouse near

Shanghai. Photo used with permission of Terry Mace, Division

of Forestry, Wisconsin Department of Natural Resources.

5 Based on information gathered from interviews conducted

during the trade missions.

A portion of the skyline of Shanghai, considered by many to be the modern financial center of China. Photo used with permission

of Terry Mace, Division of Forestry, Wisconsin Department of Natural Resources.
16

STUDY 2: OPPORTUNITIES AND CHALLENGES

FOR SECONDARY PRODUCERS

STUDY DESCRIPTION

How do hardwood companies find information on this

potential market? One approach is to work with relevant

trade associations. The Modern ArchiTectural Information

Company (MATi), formed around 2001, is an association

of designers and architects providing engineering support

to design and architectural firms and their suppliers in

China. MATi services include assistance with development

of new products and specifications, as well as promotion

of new products to designers and builders. Several MATi

executives were interviewed on the trade mission and

a survey of the membership was discussed. We later

surveyed the membership of MATi (in the winter of

2007) to ascertain opportunities for export of value-added

hardwood products from the United States to China.

Questions were designed to understand more about

the product and service attributes desired by high-end

developers and architects in China. The questions were

developed based on observations from the several trade

missions to China.

Responding Firms

We received 102 usable responses. Eighty-three percent

of responding firms were architect or design firms so

consequently 90 percent of respondents were architects

or designers. Eighty-six percent of the firms worked with

interior finishing in their developments and 85 percent

described themselves as operating at medium-high to high

price-points. More than 97 percent of the firms operated

in the Shanghai market; 14 percent operated in Beijing and

13 percent operated in other cities. While Shanghai and

Beijing are the top investment destinations for real estate

in China (Cao et al. 2006) numerous other “second tier”

and smaller cities also are experiencing rapid growth.

Shanghai is generally viewed as a more progressive market

in terms of architecture and design while Beijing is

generally thought of as more conservative.

Table 11 shows that the responding firms were developing

a variety of property types as well, ranging from offices

to single-family housing. Approximately 80 percent of

Chinese residents living in urban areas reside in multifamily

high rise buildings, ranging from six-floor walkups to

luxury condominiums and apartments; only about

10 percent live in single-family homes (Cao et al. 2006).

Table 11.—The types and percentages of real estate

designed and/or developed by responding companies

Percent of

Real estate type firms involved

Office space 90.2

Multiple family housing (apartments) 77.5

Single-family housing (villa or townhouse) 70.6

Commercial space 70.6

Other 25.5

High-end townhouses outside of Shanghai, modeled after

western developments. The superstructures are made of

poured concrete and reinforcing bar. Such developments offer

export opportunities for value-added wood products and services.

Photo used with permission of Terry Mace, Division of Forestry,

Wisconsin Department of Natural Resources.
17

STUDY 2: OPPORTUNITIES AND CHALLENGES

FOR SECONDARY PRODUCERS

LESSONS LEARNED

Product Attributes

Quality wood products - The first question asked

respondents’ opinions on whether a market existed for

premium quality hardwoods in the firms’ Chinese real

estate developments. Observations from previous trade

missions revealed that the Chinese market was filled with

expensive products at the higher end, but were sometimes

low in quality. Not surprisingly, 97 percent indicated that

there was such a market. Respondents were then asked

what constituted premium hardwood products. Results

(Table 12) indicate that attributes related to the

environment, durable craftsmanship, and health rose

to the top of the list. In many of China’s largest cities,

the outdoor air quality can sometimes be poor. It was

suggested during the interviews that families want the air

quality within their homes to be healthy as a place of

refuge from the out-of-doors. Others also have indicated

that health is the most important factor to Chinese

consumers when choosing interior decorating materials

(Butterworth and Lei 2006). It also has been suggested

that Chinese consumers are value buyers more than price

buyers – the cheapest product is not necessarily the most

popular product if it is not perceived to be long-lasting

and high quality (University of Pennsylvania 2006c). Thus,

durable craftsmanship was found to be very important to

respondents, embedded between the environmental and

health attributes.

Good design has been shown in other studies to be

important to consumer evaluation of wood products

(Brinberg et al. 2007), but was cited only 50 percent of the

time by MATi respondents. Perhaps design is an attribute

that evolves in importance as other basic attributes, such as

product health and durability, improve. It also was interesting

that lighter colored woods scored higher than darker colored

woods, although generally wood color was not important to

perceived quality. Virtually no respondents associated high

cost with quality, perhaps indicating the cost-conscious

nature of the Chinese market. All respondents indicated on

a separate question that use of environmentally friendly or

energy-efficient products was at least somewhat important

to their developments (Table 13).

Important attributes for appearance versus functional products -

Respondents were asked to indicate the importance of

several factors to their sourcing of two different products:

staircases and windows. Observations from the trade

missions suggested that product types based on appearance

(e.g., staircases) might have a different set of attributes

associated with them than would more functional or

technical product types (e.g., windows). Results show

(Table 14) that product quality was clearly the most

important factor, followed by healthy finishing (defined as no

off-gassing) and energy efficiency. Design also was important

for staircases, as was availability of professional installation

and ease of operation for windows. The desire for

professional installation confirmed observations from

the trade missions – dependable installation services were

difficult to find and a potential source of competitive

advantage for U.S. producers willing to provide this service

with their products.

Table 12.—Percentage of respondents indicating the

attributes constituting a premium quality hardwood product

Attribute Percent

Environmentally friendly 88.2

Durable craftsmanship 81.4

Healthy product 75.5

Long service life 59.8

Good design 50.0

Widely known brand name 46.1

Lighter wood color 44.1

Darker wood color 33.3

High cost 5.9

Other 2.0

Table 13.—Responses to the question, “How important is

using environmentally friendly or energy efficient products

in your design or development?”

Category Percent of respondents

Very important 42.2

Somewhat important 57.8

Not important 0.0
18

STUDY 2: OPPORTUNITIES AND CHALLENGES

FOR SECONDARY PRODUCERS

While the factors were generally similar for both product

types, differences were observed in terms of species used

and manufacturing country of origin. In both instances,

these were deemed more important for staircases,

suggesting an image or status aspect associated with

the appearance-based wood products.

Species use - Given the relative importance of species to

appearance-based products, respondents were asked to

rate the perceived image of a number of U.S. species

by Chinese customers for high-end architectural wood

applications. Walnut and cherry were rated as having the

highest status image (Table 15), followed by oak and

maple. This seems to contradict the previous finding that

darker woods were lower in quality than lighter woods

(Table 12), but might reflect the fact that darker woods

are more common to Chinese designs and thus lighter

woods are associated with imported, higher-end products.

Rubberwood (Hevea brasiliensis), beech (Fagus spp.), and

ash (Fraxinus spp.) fared somewhat poorly in terms of

perceived image. Rubberwood is a species common to

plantation forest production in Asia and has been

increasing in market share in imported furniture pieces

to the U.S.

Table 14.—Mean responsesa to the question of how

important each factor was to sourcing of wood staircases

and wood windows

Staircases Windows

Factor mean mean

Product quality 4.6 (0.7)b 4.5 (0.7)

Healthy finishes (no off-gassing) 4.1 (0.9) 4.2 (0.8)

Energy efficiency ---c 4.1 (0.9)

Architectural design 4.0 (1.0) ---

Availability of professional installation 3.9 (0.9) 4.0 (1.0)

Ease of operation --- 4.0 (1.1)

Species used 3.9 (1.0) 3.5 (0.9)

Wood appearance 3.7 (0.9) 3.9 (0.9)

Strong brand name 3.5 (1.1) 3.4 (1.2)

Manufacturing country of origin 3.2 (1.1) 2.9 (0.8)

aScale anchored by 1=not important and 5=very important.

b Numbers in parentheses are standard deviations.

c Factors not relevant to the specific product.

Table 15.—Mean ratingsa of perceived species

images by Chinese customers for high-end architectural

wood applications

Species Mean Species Mean

Walnut 3.9 (1.0)b Cherry 3.8 (1.0)

Oak 3.6 (0.8) Maple 3.5 (0.8)

Alder 3.3 (0.9) Rubberwood 3.1 (0.9)

Beech 2.9 (1.0) Ash 2.4 (1.0)

aScale anchored by 1=low status image and 5=high

status image.

b Numbers in parentheses are standard deviations.

Manufacturing country of origin - Numerous studies

have shown that country of origin is important to the

perceptions associated with certain product categories

(Buehlmann et al. 2006). In the current study, while not

rated as highly important overall, country of origin was

found to be relatively more important to appearance-based

products (Table 14); this was investigated in more detail

and results are shown in Table 16. Nearly half of

respondents indicated that premium hardwood products

made in China were perceived to be lower in status than

those made in the United States. Roughly a quarter each

of the remaining respondents indicated that Chinese

products were perceived to be higher status or that there

was no difference between the two sources, respectively.

This would seem to offer a potential competitive advantage

to U.S. firms, especially given the positive image of several

U.S. species (Table 15). Still, only a minority of respondents

indicated a status advantage for U.S. products suggesting

that other important factors such as health, craftsmanship,

and installation are critical to success for U.S. firms

seeking to export to the higher-end Chinese market.

Table 16.—Percentage of respondents indicating that

Chinese products were higher, lower and equal in status

to those made in the United States

Percent

Category of respondents

Higher in status than those made in the U.S. 28.9

Lower in status than those made in the U.S. 45.4

Equal in status with those made in the U.S. 25.8
19

STUDY 2: OPPORTUNITIES AND CHALLENGES

FOR SECONDARY PRODUCERS

Price sensitivity - Lastly, respondents were questioned about

the price sensitivity of several sectors of the interior

hardwood finishing market in China. Flooring was clearly

viewed as the most price-sensitive (Table 17), while doors

and staircases were viewed as less price-sensitive. For U.S.

firms seeking to export to China, greater opportunity

likely lies with these less price-sensitive products, although

there was not a large degree of separation between any

of the products other than flooring.

Service Attributes

Installation and service after sale - An opportunity for

competitive advantage observed from the trade missions

centered on the provision of installation services. There

is essentially no do-it-yourself market in China. To date,

most new construction is simply an unfinished concrete

shell which requires substantial finishing (new flooring,

staircases, doors, cabinets) prior to occupancy. Often times

the installers are not dependable and other than those

associated with known entities, such as the big box

retailers, there is little accountability for the work done.

Interviews on the trade mission with executives from

B&Q, a major big box retailer serving mid-level markets

with 60 stores located in larger cities throughout eastern

China, indicated a “pyramid of knowledge” involving

manufacturers, retail stores, and installers. Each is a critical

link in the Chinese home construction/improvement

supply chain.

Table 17.—Mean responsesa of the price sensitivity of

several interior hardwood products in the Chinese market

Product Mean

Flooring 3.9 (1.1)b

Windows 3.5 (1.2)

Architectural mouldings 3.5 (1.3)

Kitchen cabinets 3.4 (0.9)

Staircases 3.2 (1.0)

Doors 3.2 (1.0)

aScale anchored by 1=not price-sensitive and 5=very

price-sensitive.

b Numbers in parentheses are standard deviations.

Installation becomes even more important when considering

that reliability (dimensions, opening sizes, etc.) in many

residential construction jobs is poor, even in the same

development – thus it was indicated in the interviews that

every construction project in China is a “custom” job given

current building practices. In other words, good field

measurement is critical. The existence of building codes

is very limited in China and those that are enforced are

primarily for commercial construction. One further point:

there is a trend away from the unfinished shell model

and toward sale of new finished condos, which shifts

responsibility (and markets) toward developers or their

contracted interior finishing companies to make purchasing

decisions (Cao et al. 2006). Thus interior decorating in China

residential developments may move from a consumer

market to an industrial market. There currently are few

university graduates in the field of interior design in China

(American Hardwood Export Council 2005), which might

result in increased demands for decorating and installation

services in these markets. Further, to help fill this void,

the influence of overseas designers is increasing in China

with subsequent demand for higher-end U.S. hardwoods

(American Hardwood Export Council 2005).

Respondents were asked about installation services (Tables

18 and 19). A majority (89 percent) indicated that trained

professional installers are a necessity, and more importantly

to potential suppliers, 75 percent of respondents said that

provision of professional installation services would

help them make more sales. An overwhelming majority

(92 percent) indicated that after-sale service was very

important to them and their customers, compared to the

8 percent who indicated it was somewhat important (no

respondent replied that it was unimportant). However, the

percentage drops (64 percent) when asked how important

it is for the manufacturer to have an office in China

for building material products (Table 20). This seems

to provide further evidence for opportunity for U.S.

exporters who can provide service through contracted

representatives or other means.
20

STUDY 2: OPPORTUNITIES AND CHALLENGES

FOR SECONDARY PRODUCERS

Table 18.—Responses

to the question, “In your

opinion, are trained

professional installers a

necessary service for you

and your customers?”

Percent of

Category respondents

Yes 89.2

No 0.0

Sometimes 10.8

Table 19.—Responses

to the question, “If you

could provide professional

installation services for

wood products, would it

help you make more sales?”

Percent of

Category respondents

Yes 78.4

No 0.0

Not sure 21.6

Table 20.—Responses

to the question, “How

important is it for the

manufacturer to have a

China office for building

material products?”

Percent of

Category respondents

Very important 63.7

Somewhat important 33.3

Not important 2.9

Table 21.—Responses

to the question, “In your

opinion, would a product

demonstration showroom

be a valuable tool for you

and your customers?”

Percent of

Category respondents

Yes 67.6

No 1.0

Sometimes 31.4

Using the example of a durable good such as televisions,

65 to 70 percent of televisions are sold through traditional

channels (University of Pennsylvania 2006b). Firms seeking

to sell outside of Shanghai, Beijing, or the other largest

cities in China must take this into account. However,

the larger markets are where the bulk of the current

opportunities for value-added wood products are located.

Expected delivery times - Expected delivery time was a final

consideration from the MATi survey. For solid wood

interior doors, custom built exterior doors and windows,

and hardwood flooring, a majority indicated that expected

delivery time would be 14 days or less (Table 23). However,

for custom built kitchen cabinets and custom built stairways,

most respondents expected 15 days or more. These latter

products likely have the greatest opportunity for U.S.

exporters; flooring would seem to be an especially difficult

export product for U.S. firms, due to the expectation of

quick delivery and price sensitivity (Table 17).

Table 22.—Percentage of respondents indicating the ways

a product demonstration showroom would be useful

Category Percent

It would facilitate communication with customers 83.3

It would be a status sign to customers 63.7

It would be useful to demonstrate product functionality 53.9

It would be useful to demonstrate product quality 53.9

It would be a convenient location for customers

to place orders 37.3

Other 3.9

Table 23.—Responses to the question, “When you

purchase products, what is the delivery time you expect?”

Within Within 15 to 30 Within

Product 7 days 14 days days 60 days

Solid wood interior doors 21.6% 48.5% 27.8% 2.1%

Custom built exterior

doors and windows 18.6% 41.2% 33.3% 7.2%

Hardwood flooring 23.7% 34.0% 41.2% 1.0%

Custom built

kitchen cabinets 10.3% 24.7% 63.9% 1.0%

Custom built stairways 5.2% 23.7% 60.8% 10.3%

Product demonstration - Another opportunity for potential

competitive advantage that emerged from the trade

missions was related to product demonstration. A majority

(68 percent) indicated product demonstration would be

useful (Table 21). Clearly, the most frequently cited use for

a demonstration showroom was to facilitate communication

with customers (Table 22). This was followed by being a

sign of status to customers and demonstrating product

quality and functionality. Order placement was somewhat

infrequently cited.

Product demonstration is part of the bigger challenge of

distributing products for display and sale in some parts of

China. Estimates suggest that only about 25 percent of the

500 million consumers living in or near the 3,000 largest

cities in China are reached by modern retailers. Most other

distribution falls to local networks; by the time goods reach

the countryside they could be delivered by small cars,

motorcycles, or bicycles, and with limited selection available.
21

STUDY 2: OPPORTUNITIES AND CHALLENGES

FOR SECONDARY PRODUCERS

SECONDARY PRODUCERS

CASE EXAMPLES

Case 1: Hardwood Flooring Exports

to China

An upper Midwestern hardwood strip flooring company has

had mixed success in seeking business in China. They do not

have an agent representing them in China, but do have an

international sales representative which travels to China

quarterly. To meet potential clients, they have participated in

trade shows in Beijing, Guangzhou, and Dalian with some

success. The firm has used the 2008 Summer Olympics to

its advantage. Since hard maple is the species of choice for

sports floors, the company was able to overcome shipping

disadvantages by providing the flooring systems for several

Olympic venues in Beijing with this species.

One disadvantage for U.S. flooring manufacturers is

the preference for specified lengths within the Chinese

marketplace. Most of the hardwood flooring sold in China

is 1.0 or 1.5 m long as opposed to the random-length solid

strip flooring sold in the United States. To capture more

markets, domestic producers need to adapt their products

to meet the Chinese fixed-width and length specifications.

In conversations with the buying agents at one Chinese home

center during the last trade mission, it was stated that they

had carried U.S.-produced random length flooring in the

past. This product was accepted by the Chinese market;

however, the U.S. manufacturer could not produce the

volumes necessary to satisfy the demand from the Chinese

home center. The home center buying agent stated that

they would consider buying U.S.-produced hardwood solid

strip random-length flooring again if they could be supplied

in sufficient volumes, but that quantity was beyond the

production capacity of this single firm.

Trends in residential flooring in China continue to favor

dark colors, especially those of certain tropical species.

This flooring company continues to pursue markets

within China and may have success in specialty flooring

applications, such as sports floors. In addition, the firm is

considering hiring an agent to act as a sole representative

of their company to help target the higher margin

specialty flooring market.

Case 2: Interior Hardwood Stair System

Exports to China

Opportunities for value-added hardwoods in the Chinese

market are the result of increased domestic wealth and

the increase in high-rise condominium construction.

The Chinese condominium buyer purchases an empty

concrete shell in contrast to the fully finished units sold in

the United States. It is left to the buyer to make provisions

for finishing the interior, including electrical, plumbing,

wall and floor coverings, cabinets, and more. One such

value-added product identified by the Chinese home

centers during trade mission interviews was hardwood

stair systems. Many of the condominium units are

multi-level. Decorative hardwood stair systems can

add value and aesthetics in place of a standard poured

concrete stair system.

Examples of high-quality veneered interior doors produced in

China. Photo used with permission of Scott Bowe, University

of Wisconsin-Madison.
22

STUDY 2: OPPORTUNITIES AND CHALLENGES

FOR SECONDARY PRODUCERS

One Chinese home center stated that hardwood stair

systems have been on backorder for months given the

limited number of suppliers, and the limited number

of qualified installers. A Midwestern stair company is

currently looking into an expansion of its stair business

into the Chinese marketplace. Options they are

considering include production of modular systems

in the United States to export to China, or establishment

of a production facility in China.

Hardwood stair systems are only one opportunity. The

home center industry is booming in metropolitan areas

of China. According to Paul Swenson, Director of the

Council of Great Lakes Governors trade office, the

Chinese home-center market currently has money in

search of quality wood products, especially at the villa

and single-family home level. Swenson suggested that

some of the following products could be successful:

• Trim, mantels, wainscoting, chair rails, and kicks

• Decorative wall panels

• Kitchen, bath, and utility cabinets

• Interior passage doors

• Closet doors - louvered and solid wood

• Main entry doors

• Wood flooring

• Windows - sunrooms, greenhouses

• Treated lumber kits such as deck kits and wooden

playground kits

• Garden products - retaining walls, rails, and fencing

Export of products such as these could serve the growing

domestic market within China.

CONCLUSIONS

Secondary Products

Several opportunities for U.S. exports of hardwood

products were identified through trade mission

observations and the MATi survey. The U.S. currently

has a status advantage in high-end Chinese markets and

seems well positioned to offer key product attributes,

including environmentally friendly and healthy products,

and durable craftsmanship. Several U.S. species,

particularly walnut and cherry, enjoy high status in

Chinese high-end markets. The United States could be

especially well positioned for export of appearance-based

products with low price sensitivity and longer expected

delivery times, such as staircases and cabinets. Interviews

during the trade missions suggested that stairway

production in particular is a very immature sector in

China with strong demand and substantial opportunities

for market entry. A key aspect of success seems to be

product promotion to Chinese buyers; the survey results

support the role that product showrooms can play in

communicating to potential Chinese customers. Provision

of dependable after-sale service, particularly installation

services, could enhance the position of U.S. exporters.

But even in these higher-value markets, price is an

important attribute, although Chinese consumers are

willing to pay more for perceived value.
23

RELEVANT BARRIERS TO TRADE

BUSINESS CULTURE

DIFFERENCES

Despite decades of trade between the United States

and China, estimates of a combined $6 billion in wood

products exports between the two countries in 2007

(Wagner 2007), and the opportunities described in this

report, many challenges still exist. Several issues emerged

from the trade missions and surveys. Some of the key

challenges include business culture differences, different

technical terms and standards, access to quick market

information, and transportation barriers from the interior

United States.

Business Relationships

In the United States, sales can sometimes be initiated

by phone calls or emails without meeting face-to-face

because there are reliable policies to guarantee the quality

of products and prompt payment. But in China, this

arrangement is risky before a solid relationship is

established. Trustworthy relationships are not easy to

establish unless there is a close connection with the

company’s high level management. Establishing a sales

relationship can best be achieved by direct meetings and

conversations. Online sales currently are not reliable in

China. Therefore, contacts found online or through company

websites are not ideal without an established relationship.

Price Quotes

The use of price quotes is common in China, which has

a price-driven market. Price lists or quotes are the first

things customers will ask for before discussing any

product specifications, such as quality or grade. Price

quotes are easy to obtain in China, but also easy to change

from the time of the quote to the close of the sale. The

quote on paper does not hold any force of law in China,

which means easy come and easy go. In the United States,

a price quote is often viewed as a commitment between

the seller and buyer. Therefore, clear communication

is critical for initiating relationships and establishing

long-term commitments between business representatives

from the two countries.

TECHNICAL TERMS

AND STANDARDS

The complicated U.S. hardwood lumber grading system

and other technical standards are difficult for many

Chinese customers to understand, especially those who

do not speak English. It could take a long time for the

Chinese customer to learn the rules and realize the

products that they receive may not be what they thought

they were paying for. Establishing relationships and trust

is critical. It may be effective for both sides to communicate

about the buyers’ specific needs and then customize

products with the price to create win-win situations.

ACCESS TO QUICK

MARKET INFORMATION

The Chinese market and associated manufacturers are

regionalized in business climate, consumption patterns,

infrastructure, logistical systems, and government roles.

For example, the furniture and flooring manufacturers are

concentrated along the coastal areas, such as Guangdong,

Fujian, and Zhejiang provinces, mainly to be positioned

for the export market. To export American lumber or

even value-added products to China, brand promotion or

advertisement is important. With Chinese manufacturers

clustered, market information can spread quickly. Any

changes in raw material demands and/or customers

preferences can cause dramatic market shifts. Being

among the first to discern such changes can provide

a big advantage for U.S. hardwood producers.
24

RELEVANT BARRIERS TO TRADE

TRANSPORTATION BARRIERS,

ESPECIALLY FROM THE

INTERIOR U.S.

When exporting wood materials to China, interior locations,

such as the Lake States, can sometimes face a transportation

cost disadvantage when compared to states more proximate

to coastal ports (Fig. 3). Products with more added value

might be able to absorb these added transportation costs if

the higher margins are significant. Companies operating in

interior areas can overcome freight disadvantages by making

value-added customized products or entering the export

market when there are a high demand for certain products,

and then continuing promotion and business relationships

to compete for long-term export markets. Exporting by

state as a percent of total production is analyzed below 

Figure 3.—Major shipping routes within the United States,

relative to the Lake States region.

Table 24.—State GDP in wood products (NAICS 321), wood

products exports, and wood products exports as a percent

of GDP for states in the eastern hardwood forest region

GDP in wood Exports of wood Exports

products, 2005 products, 2006 as %

State (million $)a (million $)b of GDP

New York 625 238 38.1

Vermont 178 46 25.8

Connecticut 102 23 22.5

Maine 510 97 19.0

Kentucky 708 127 17.9

Ohio 1,209 214 17.7

Pennsylvania 1,933 334 17.3

Michigan 892 148 16.6

New Hampshire 227 37 16.3

Missouri 485 79 16.3

North Carolina 1,933 302 15.6

New Jersey 339 52 15.3

Florida 1,531 229 15.0

Virginia 1,402 208 14.8

Indiana 1,299 191 14.7

West Virginia 628 86 13.7

Maryland 278 38 13.7

Tennessee 1,071 137 12.8

17 other states --- --- below median

Median (n=35) 708 86 12.8

a U.S. Department of Commerce, Bureau of Economic

Analysis (n.d.)

b U.S. Department of Commerce, International Trade

Administration (n.d.)

6 The States’ 2006 per capita trade budgets (using data from

the State International Development Organizations [SIDO] for

state trade division budgets and Census population data for 2000)

also seemed to have little to do with the state rankings – those

states above the median export rate for wood products budgeted a

median of $0.34 per resident on trade and while states in the

lower half of exporting rates budgeted a median of $0.35 per

resident. This measure must be interpreted with caution since it

represents data for a single year and state expenditures for trade

programs can change from year to year. Other factors also come

into play, including the behavior of individual firms within given

states and the export value of the existing resource base in terms

of species and/or quality.

for two major NAICS categories for wood products. The

35 states included comprise the eastern hardwood forest

region, as defined by the Wood Education and Resource

Center (www.na.fs.fed.us/werc/).

Wood Products Manufacturing

For wood product manufacturing (NAICS 321), which

includes lumber, plywood, veneer, wood containers,

wood flooring, wood trusses, manufactured homes, and

prefabricated wood buildings, international exports as a

percent of total production ranged from 38.1 to 1.8 percent

across the 35 states investigated. The median export rate

was 12.8 percent (Table 24). It seems that states both

proximate and distant to port locations scored above the

median.6 Some of the states notably distant, and with

relatively large GDP in wood products, included Indiana,

Tennessee, Michigan, Kentucky, and West Virginia.
25

RELEVANT BARRIERS TO TRADE

Furniture and Related Product Manufacturing

Data also were available for furniture and related product

manufacturing (NAICS 337), which includes furniture,

mattresses, window blinds, cabinets, and fixtures. Here,

international exports as a percent of total production

ranged from 20.6 percent to 1.1 percent across the 35

states investigated. The median export rate for furniture

and related products was 7.5 percent (Table 25). Again,

it seems that states both proximate and distant to port

locations scored above the median. Some of the states

notably distant, and with relatively large GDP in furniture

and related products, included Michigan, Wisconsin,

Illinois, Tennessee, and Minnesota.

Discussion of Transportation Barriers

An issue that emerged from this project was that for states

closer to the interior of the eastern United States, it might

be more feasible to export secondary or value-added

products rather than primary products due to shipping

costs. For some states with relatively large output of both

primary products (defined here as NAICS 321, wood

products manufacturing) and secondary products (defined

here as NAICS 337, furniture and related products), this

seemed to be the case. Notably, Wisconsin (with $1,551

million in primary products GDP) and Minnesota (with

$1,306 million in primary products GDP) ranked above the

median for exports of secondary products (Table 25) but

below the median for exports of primary wood products.

In sum, there seems to be wide variety among states in

terms of exporting forest products with no clear patterns

emerging based on location, although distance to ports

does sometimes appear to play a role. A final point is that 

Table 25.—State GDP in furniture and fixtures (NAICS 337),

furniture and fixture exports, and furniture and fixture

exports as a percent of GDP for states in the eastern

hardwood forest region

GDP in Exports of

furniture and furniture and Exports

fixtures, 2005 fixtures, 2006 as % of

State (million $)a (million $)b GDP

Louisiana 102 21 20.6

Florida 1,110 176 15.9

Connecticut 218 34 15.6

Maryland 236 30 12.7

New York 1,110 134 12.1

New Jersey 582 66 11.3

Illinois 1,119 126 11.3

Ohio 1,738 187 10.8

Texas 1,704 181 10.6

Tennessee 914 94 10.3

Michigan 3,798 388 10.2

Wisconsin 1,260 126 10.0

South Carolina 174 17 9.8

Maine 65 6 9.2

Kentucky 361 30 8.3

Mississippi 1,427 109 7.6

Minnesota 853 64 7.5

North Carolina 3,060 228 7.5

17 other states --- --- below median

Median (n=35) 840 34 7.5

a U.S. Department of Commerce, Bureau of Economic

Analysis (n.d.)

b U.S. Department of Commerce, International Trade

Administration (n.d.)

across the 35 states included in the analysis, the median

exporting rate is higher for primary products than for

secondary products, suggesting that U.S. firms, at present,

generally are geared more toward exporting raw materials

and not finished products.
STATE EXPORT RESOURCES

26

Many states offer export assistance for resident companies that are interested in exploring export opportunities. The

following directory provides a starting point for producers interested in exploring international trade opportunities within

the eastern hardwood forest region. It does not necessarily represent all of the trade assistance resources available in a

given state. All websites were current as of October 21, 2008.

• Alabama Development Office, Office of International

Trade 8 www.ado.alabama.gov/content/ourservices/

international_trade/trade_main.aspx

• Arkansas Economic Development Commission

8 www.arkansasedc.com/business-development/

international-business.aspx

• Connecticut Department of Economic & Community

Development 8 www.ct.gov/ecd/site/default.asp

• Delaware Office of Management and Budget

8 http://itc.omb.delaware.gov

• Enterprise Florida, Exporting Assistance

8 www.eflorida.com/ContentSubpage.aspx?id=466

• Georgia Department of Economic Development

8 www.georgia.org/Business/International

• Illinois Department of Commerce and Economic

Opportunity, Office of Trade and Investment

8 www.commerce.state.il.us/dceo/Bureaus/Trade

• Indiana Economic Development Corporation, Office

of International Development 8 www.in.gov/iedc/

international.htm

• Iowa Department of Economic Development,

International Office 8 www.iowalifechanging.com/

business/export_assistance.html

• Kansas Department of Commerce, Trade

Development Division 8 www.kansascommerce.com/

IndexPages/Div04a.aspx

• Kentucky Cabinet for Economic Development,

International Trade Division 8 www.thinkkentucky.com/

kyedc/internationaltrade.aspx

• Louisiana Economic Development Department

8 www.lded.state.la.us

• Maine International Trade Center 8 www.mitc.com

• Maryland Department of Business and

Economic Development, International Operations

8 www.choosemaryland.org

• Massachusetts Office of International Trade

and Investment 8 www.moiti.state.ma.us

• Michigan Economic Development Corporation

8 www.michiganadvantage.org/Expand-Your-Business/

Export-Assistance/Default.aspx

• Minnesota Department of Employment and

Economic Development, Minnesota Trade Office

8 www.exportminnesota.com

• Mississippi Development Authority, Trade Bureau

8 www.mississippi.org/content.aspx?url=/page/3280&

• Missouri Department of Economic Development,

Business and Community Services 8 www.missouri

development.org/Business%20Solutions/Global%

20Business%20Assistance.aspx

• Nebraska Department of Economic Development,

Office of International Trade and Investment

8 www.neded.org/content/view/78/137/

• New Hampshire Division of Economic

Development, Office of International Commerce

8 www.nheconomy.com/international-trade/

• New Jersey Office of Economic Growth

8 www.nj.gov/njbusiness/international/

• (New York) Empire State Development

8 www.nylovesbiz.com/Small_and_Growing_

Businesses/global_markets.asp

• North Carolina Department of Commerce

8 www.nccommerce.com/en/BusinessServices/

InternationalBusiness/

• Ohio Department of Development, Global Markets

Division 8 www.odod.state.oh.us/itd/ServicesFor

Exporters.htm

• Oklahoma Department of Commerce

8 www.okcommerce.gov

• Pennsylvania Department of Community and

Economic Development 8 www.NewPA.com/trade

• Rhode Island Economic Development Corporation

8 www.riedc.com/business-services/internationaltrade-and-exporting

• South Carolina Department of Commerce

8 www.sccommerce.com/businessservices/export

development.aspx

• Tennessee Department of Economic and Community

Development 8 www.state.tn.us/ecd/bizdev_idg.htm

• Texas Office of the Governor, Economic Development

and Tourism 8 www.governor.state.tx.us/ecodev/

• Vermont Department of Economic Development,

Agency of Commerce and Community Development,

Vermont Global Trade Partnership 8 www.economic

development.vermont.gov/Programs/GlobalTrade/

tabid/121/Default.aspx

• Virginia Economic Development Partnership, Division

of International Trade 8 www.exportvirginia.org

• West Virginia Development Office, International

Division 8 www.wvdo.org/international/index.html

• Wisconsin Department of Commerce

8 www.commerce.state.wi.us/IE/
27

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Printed on Recycled Paper

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and employer.

LIBRARY CARD

Bowe, Scott; Bumgardner, Matt; Mace, Terry. 2008. Opportunities and challenges for the export of U.S.

value-added wood products to China. Gen. Tech. Rep. NRS-35. Newtown Square, PA: U.S. Department of

Agriculture, Forest Service, Northern Research Station. 28 p.

This report explores some of the opportunities for, and challenges associated with, exporting wood products

to China. Five topics are examined: an overview of trends in forestry and forest products in China, export

opportunities and challenges for U.S. primary wood producers (Study 1), export opportunities and challenges for

U.S. secondary wood producers (Study 2), relevant barriers to trade, and a compilation of state export resources.

This work is based on observations from three trade missions to China (March 2004, March 2005, and July 2006),

interviews with persons knowledgeable with hardwood markets in China, and two surveys of Chinese forest

products business groups.

KEY WORDS: China, exporting, hardwood lumber, hardwood products, trade