Econometric Analysis of China's Plywood Market

Abstract

China's primary wood-processing industry and wood-consuming sectors have experienced rapid growth in recent years. Plywood is the most important primary wood product in China in terms of consumption, production, and exports. One of China's most important export destinations is the United States, to which China exports not only plywood but also wood in the form of furniture. In this article, we analyze the development of China's plywood industry since the 1990s; provide an overview of the demand, supply, and exports of Chinese plywood; and present the results of econometric models. The Engle–Granger error-correction model was applied to an analysis of annual time-series data from 1993 to 2007. The results suggest that most of the growth in China's plywood demand was primarily driven by the growth in consumer income, while an increase in product price had only a small negative effect. In contrast, an increase in raw material price had a significant negative impact, but end-use sector activity had no significant effect on China's plywood supply. During the same period, the growth in China's plywood exports was due to consumer income growth in the US market. Knowledge of the elasticities and findings presented here can serve as a useful reference for foreign and domestic wood product companies that plan their investments, as well as government agencies and public authorities that plan economic and forest policies.