China is a country with insufficient forest resources, small forest area, small number of resources and unbalanced regional distribution. China is also a typical big country of forest products production and consumption, and also the largest forest products processing and production base, and the most important forest products processing and export country in the world. The development of forest product industry needs to consume a lot of forest resources, and the traditional industry mainly depends on the supply of natural forest. Modern forest product industry is an industry that makes full use of advanced science and technology, based on the principle of circular economy, efficiently uses and recycles forest resources to meet the increasing demand of human beings for forest products. The sustainable development of forest product industry in China needs circular economy. Circular economy is the fundamental way to solve the contradiction between economic development and ecological environment. This paper introduced the basic concept of circular economy and the general situation of the development of modern forest product industry. The necessity of the development of circular economy and the realization of sustainable development of forest product industry were discussed. Suggestions were also put forward for the realization of circular economy in forest product industry.