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NZ sawn timber exports suffer as China buys more raw logs

Tuesday 29th November 2011 1 Comment

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New Zealand’s sawn timber exports to China have been ‘hammered’, while raw log shipments surged in the wake of Beijing’s efforts to cool the economy and amid increased sales by rival forestry nations such as Canada, according to the industry lobby group.

Lumber exports fell 16 percent to $264 million in the four months ended Sept. 30, according to New Zealand Timber Industry Federation figures. Exports to China fell 19 percent to $44.7 million and shipments to the US fell 23 percent to $40.2 million.

Log exports rose 28 percent to $509 million in the four months ended Sept. 30. Exports to China rose 47 percent to $337 million and shipments to the Japan increased 16 percent to $30 million.

“Sluggish demand for lumber sees big excess capacity at Chinese sawmills,” said Brent Coffey, the federation’s head. “Construction is down so lumber for concrete formwork is down.”

Changes in demand in China are coming as a weak residential construction sector in New Zealand saps local demand. Companies including Fletcher Building have reported weaker profits in the face of a soft property market and delays in the rebuilding of Christchurch.

“It is a difficult economic backdrop” for the timber industry, said Philip Borkin, economist at Goldman Sachs New Zealand. Still, “the market is incredibly volatile and you have to be careful when reading between quarters.”

The lobby group’s report, in a newsletter that Coffey sends to members, comes after government data showed New Zealand’s forestry exports grew through most of last year on strong Asian demand.

In July, Ministry of Agriculture and Forestry data showed the total value of kiwi log exports rose $800 million to $4.4 billion in the 12-months ending March 31, driven predominantly by exports to China.

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On 29 November 2011 at 11:39 am Siena said:
China faces challenges in terms of its strategy to realize sustainable development.In short, China is faced with two challenges in economic rules and industrial outsourcing vis-à-vis adapting to the mainstream world economy, during the era of post international financial crisis. 1. Pressure from the International Game Rules For long, international game rules have been an effective tool for the developed countries to seek for their established interests, an important media for them to deal with emerging countries, especially China in terms of sustainable economic development. Politically speaking, more and more countries have been striving to remold and guide China via laws, policies, gules and morality, while taking a ride on the wagon of its booming Chinese economy. Under the pretext of helping China to adapt to the international economy or become a responsible global partner, they have been urging the former to expedite the political reform while furthering economic reform and opening up, in a collective effort to convert China to a member of the international system that is dominated by the Western values and rules.Economically speaking, they have been pressurizing China to abide by their industrial and technical standards, requesting the latter to carry out the same international obligations, shoulder the same economic responsibilities, and provide the same development assistance, etc. However,all the existing international economic rules have been formulated and developed in accordance with the market economy of the developed countries. Therefore, China, as a late comer in this regards, will not only have to eradicate the legacy from the central planning economy, but also participate in the international division and competition under the rules that are far beyond its development stage.International Industrial Outsourcing For long over the past, international industrial outsourcing has been an important tool for the developed countries to expand their economic boundaries, an important means for them to seek competitive advantages, as well as an important media to challenge their trade and economic partners. Within the context of the globalization, by controlling the key technologies of certain industry, a company may gain the say over the production of the relevant products through industrial outsourcing and the formation of industrial standards. Consequently, the company may be able to control the production of all the relevant products through direct investment, and control the allocation of the productive factors, in order to seek and maintain the initiative of the production links. In the same manner, a company may be able to decide and control the profitability of all the manufacturing and processing links, through controlling the international market chain.Currently, China has little say in all the above areas, and thus has been dictated by the FDI owners or international traders, thus being placed at the receiving end of international industrial chains. Since the international financial crisis erupted in 2008, the developed countries have been formulating standards in the low carbon economy and making them the important content in terms of bilateral and multilateral cooperation. The above policy measures will, not only, elevate the thresholds for China to further export its products into the international market, but also place China one more time on the receiving end of the chain of international transfer of technology, thus formulating new technical barriers for China to launch its own green industries.Generally speaking, China will, in a larger sense, face two impeding factors in terms of macro-economic management: Conflicting economic circles of its major trade and economic partners and the worsening imbalance of the development of the world economy.As China has greatly opened up its economy, the FDI has taken up a large percentage of its national economy, and the government is faced with an ever tougher challenge in terms of macro-economic management.Imbalance of the Development of the World Economy Since the economic reform and opening up, transnational corporations have outsourced production links of the main industries around the world to China, and literally converted the latter into a “world factory”, which has eventually posed an ever increasing pressure to the Chinese government in the field of macro-economic management.Firstly, it has caused ballooning surplus of industrial production capacity. After the international financial crisis, the markets in the developed countries have been contracting severely, and the relevant governments have resorted to the policy of trade protection. Therefore, Chinese economy will suffer from the more dangerous level of surplus production capability when China fails to maintain the momentum of foreign trade.Secondly, it has caused the rapid nominal increase of current account. When the US dollar is nose diving in terms of its values, China has been suffering from the evaporation of its dollar nominated financial assets.Thirdly, it has increased the dependency rate of its national economy on the international market, amplifying the difficulty to maintain the momentum of economic development. Fourthly, it has added up the pressure for RMB to appreciate. Developed countries headed by the US have been requesting China to allow RMB to appreciate drastically, in accordance with the outdated trade and financial theories. Fifthly, it has put China more directly under the impact of the “spill over” effects of the international inflation. Since China started its economic reform and opening up, the national economy has been in the track of rapid development, which has nurturing the unprecedented pressure of inflation. However, developed countries headed by the US, have been outsourcing inflation to China through Quantitative Easing policies, amplifying China’s challenges to deal with the same issue. Source: China Institute of International Studies.
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