An analysis of potential investment returns of planted forests in South China

Pu Zhang,Youjun He,Yiming Feng,Rafael De La Torre,Frederick Cubbage,Jixin Tang,Hongyan Jia

doi:10.1007/s11056-019-09708-x

Pu Zhang, Youjun He + Show 5 more

Open Access

https://doi.org/10.1007/s11056-019-09708-x

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Abstract

Financial returns of forest plantations are an important concern around the world. In this research, we focused on South China’s timber investments, collected data from the Pingxiang, Guangxi Province, China, which is the demonstration zone of Fast-growing and High-yielding Timber Plantation Base Construction Program and National Timber Strategic Storage and Production Bases Construction Program, and used capital budgeting analysis method and sensitivity analysis to compare different scenarios of planted forest management. The results showed that excluding land costs, (1) the financial returns of Eucalyptus forest managed by small business were excellent, having an IRR of 28% per year and a LEV of $7555 per ha, but it had a high risk with fluctuations of cost, timber price and timber yield; (2) the results for the Experimental Center of Tropical Forests indicate that the Eucalyptus forest and Castanopsis hystrix forest returns were greater than those for Cunninghamia lanceolata forest and Pinus massoniana forest, with having IRRs of 24%, 21%, 13% and 10% per year respectively. The mixed planted forest of Castanopsis hystrix × Eucalyptus and Castanopsis hystrix × Pinus massoniana had the features of high profits and low risks; (3) the forest farmers had lower levels of returns for Eucalyptus forest management in South China, but were still in the middle rank of global comparisons. This study gave a view of China’s timber investment and provided more options of improving the economic returns of planted forest management to both small businesses and forest farmers in South China.

Highlights

Financial returns from planted forests are one of the most important business decisions for reliable future returns around the world (Cubbage et al 2007, 2010; Wang et al 2014)
It strictly prohibited commercial logging of natural forests (Bai et al 2015) and indirectly guaranteed the area growth of planted forests that potentially support natural forest conservation (Ainembabazi and Angelsen 2014; Secco and Pirard 2015). This program gradually changed the center of timber production from state-owned natural forests in North China to planted forests in South China
This research shows the diversity and economic returns of planted forest management in China. These results indicate that small business in China was the most efficient forest managers by tenure type

Summary

Introduction

Financial returns from planted forests are one of the most important business decisions for reliable future returns around the world (Cubbage et al 2007, 2010; Wang et al 2014). There are some important policies promoting the further increase: The first policy is the Natural Forest Protection Program (NFPP), which was implemented by the Chinese government in 1998 and was aimed at protecting the forest ecosystem, and strengthening eco-conservation It strictly prohibited commercial logging of natural forests (Bai et al 2015) and indirectly guaranteed the area growth of planted forests that potentially support natural forest conservation (Ainembabazi and Angelsen 2014; Secco and Pirard 2015).

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