Forest Plantations in China Receive Canada Funding One Company's Joint Ventures with China Are Mostly Profitable, but Not without Challenges

By Fred Langan, | The Christian Science Monitor, June 8, 1994 | Go to article overview

Forest Plantations in China Receive Canada Funding One Company's Joint Ventures with China Are Mostly Profitable, but Not without Challenges


Fred Langan,, The Christian Science Monitor


CHINA grows the trees, Canada raises much of the money, and Taiwan and Japan provide the markets. The people who run Sino-Forest Corporation, which helps plant forests in a country where they are not naturally abundant, live in Hong Kong and Toronto.

This new enterprise, which operates out of Hong Kong and Toronto, bills itself as "Weyerhaeuser in China," referring to the forest-products giant in Tacoma, Wash. Not yet, perhaps, but the company claims there is potential.

But let's back up a bit. Trees in China? "People in North America think only of natural forests," says Allen Chan, chairman of Sino-Forest Corporation, which operates six joint ventures in forest products with state governments in China - owning about 50 percent of each. "For natural forests, China is not on the top of the list."

Part of Mr. Chan's job is to persuade potential investors that China has trees to harvest. He has just completed a 10 day tour of Canada and the United States, meeting with executives of Canadian forest product firms and looking for experienced people to help run his forest enterprise back in China. Trees are not the problem, Chan says.

"If you're thinking in terms of plantations - of reforestation - then China is No. 1 in the world," Chan says. He adds that vast areas of China have benefited from a reforestation program sponsored by the United Nations and the World Bank over the past 20 years.

"With these plantations, we have had sustained growth and provision of raw materials for wood products," he says.

The company's most profitable joint venture project is an 8,600 acre eucalyptus plantation and a mill that turns the trees into wood chips for export. Sino-Forest's holdings are part of a larger 131,000 acre eucalyptus tree plantation in Guangdong province which is known for its warm climate.

The wood chips are sold to Japanese, Taiwanese, and Hong Kong firms, which use them to make particle board and pulp.

Because of the planting programs of the past two to three decades, China now has one of the largest plantations of eucalyptus trees in the world, second only to Brazil. Perfume from trees

Four of the company's other joint ventures make chemicals from trees. Trees were the original feedstock of the chemical industry in the 19th century before petroleum took over. Plantations of pine, acacia, and camphor trees supply the raw product.

The "Jiangxi Camphor Joint Venture," 55 percent owned by Sino-Forest, extracts various products from camphor trees that are used to make perfume among other things. This is not the kind of forestry operation Canadians are used to.

"It's so different from anything else that we've dealt with," says Ross Hay-Roe, forest products analyst with Equity Research Associates based in Vancouver. "The things they're doing with eucalyptus trees and taking the essence of perfume from trees are things I never thought about. …

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