Abstract
China’s state-owned forest enterprises have been important national timber production bases and their timber resources have been severely degraded during the past decades. About one-third of the state-owned forestland has been classified as commercial forestland, but no economic mechanisms have been laid out on governing timber plantations under market economy. This paper demonstrates the potential investment returns and analyzes factors that directly influence the returns of fast-growing poplar plantations in a state owned-forest enterprise, China Jilin Forest Industry Group (CJFIG), in northeastern China. We examined practically possible ranges of mean annual increment (MAI), general inflation rate, rate of forest fund, and interest rate in the study area. We then computed net present values (NPV), equivalent annual income (EAI) and internal rate of return (IRR) by using the minimum, medium, and maximum values of the each determinant above. Results showed NPV ranged from $1,024 to $6,925 ha−1, EAI ranged from $120 to $623 ha−1 year−1, and IRR ranged from 13.2 to 29.3 %. We show that growing poplar plantations could be two times more profitable than managing the existing natural forests in CJFIG by referring to EAI values. Improving MAI is the most effective way to increase both NPV and IRR while changes in the one-time tax at timber harvesting or changes in inflation rate have the least effect on NPV and IRR among the determinants studied. Discount rate, which can be easily manipulated by obtaining subsidies and policy-based loans, also has substantial influence on NPV. The state owned forest enterprises in China have special advantages to obtain relatively high economic returns in developing fast-growing plantation forests under market economy.
Highlights
Investment in forest plantations is one of the most important business decisions for reliable future returns in many forestry areas around the world (Cubbage et al 2007, 2010; Shao and Li 2010)
This paper demonstrates the potential investment returns and analyzes factors that directly influence the returns of fast-growing poplar plantations in a state owned-forest enterprise, China Jilin Forest Industry Group (CJFIG), in northeastern China
All the combinations of mean annual increment (MAI), inflation rate, rate of forest fund (RFF), and interest rate resulted in net present values (NPV) ranging from $1,024 to $6,925 ha-1 (Table 3)
Summary
Investment in forest plantations is one of the most important business decisions for reliable future returns in many forestry areas around the world (Cubbage et al 2007, 2010; Shao and Li 2010). As the most populated country of the world, China has made extraordinary efforts in developing forest plantations during the past six decades (Zhang and Song 2006). By 2004–2008, China’s forest plantation area has reached 61.7 million ha, accounting for one-third of planted forests in area in the world (Huang et al 2012). China’s forest plantations are still relatively young and unproductive. The development of fast-growing forest plantations in China is necessary to meet the needs of increasingly high timber consumptions
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