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DRAFT-NOT FOR CITATION

Forestry, poverty and rural development in . Some views from the sub-sector.

Manuel Ruiz Pérez, Brian Belcher, Fu Maoyi and Yang Xiaosheng

Paper Presented at The Lessons from the Chinese Policy Experience: An International Symposium June 20 - 23, 2001 , Province – China

Forestry, poverty and rural development in China. Some views from the bamboo sub-sector.

Manuel Ruiz Pérez, Brian Belcher, Fu Maoyi and Yang Xiaosheng

Introduction.

China has implemented a major transition from a planned to a market economy over the past two decades. This has led to changes in all aspects of life and the economy, not least in the forest sector. Other papers in this volume consider a variety of aspects of these changes. This paper sets out to assess how the changes in the forestry sector have affected rural development and poverty1.

During the second half of the 20th Century, and in particular since the profound reforms initiated in 1979, China has lead a spectacular development effort that has gained world admiration, dramatically reducing income poverty (that measurement of poverty that uses monetary income or consumption) from 33% in 1978 to 7% in 1998 (UNDP 2000). China has also achieved good progress in education and particularly health related aspects of poverty, where it leads the group of lower-middle income countries, and compares favorably with many upper-middle income countries. There is a consensus that this achievement is the result of sound policies that combine pilot-project based experimentation with gradual, incremental reforms to implement the positive lessons learnt (Prosterman and Hanstad 1990; Jefferson and Rawski 1994; Liew 1995; Kwong 1997; Shi 1999). In this sense, China’s experience stands in sharp contrast with the results of the reform in Eastern European countries and the former Soviet Union (Kochin 1996; Nolan 1996; World Bank 2000).

Three policies have had particular relevance to poverty alleviation. The household responsibility system triggered a massive positive response by farmers, quickly increasing their production, which in the case of grain by 66% from 1978 to 1999 (CNBS 2000). At the same time, reform of the industrial sector took advantage of the extensive decentralized industrialization policies of the pre-reform era (Bradburg et al. 1996; Putterman 1997) and created conditions for a vital private and especially collective (town and village enterprises (TVE) industrial sector. This has spread to all corners of the country, offering new income and employment opportunities (Islam and Jin 1994; Jefferson and Rawski 1994; Jefferson and Singh 1999). The positive feedback between increased agricultural production and rural industrialization, noted by some authors (Du 1989; Islam and Jin 1994), is an important part of this story. Finally, the opening of the economy has attracted foreign investment and has linked the internal process of development with external markets, making of China one of the leading exporting countries in the world. Hyde et al (this volume) and Zhang and Chen (this volume) provide a detailed history of the reforms.

1 Poverty is a multidimensional phenomenon that has different components. Although it is frequently characterized by very reduced consumption of food and material goods, poverty also has other aspects of deprivation related to lack of education, deficient health, vulnerability, voicelessness and powerlessness (World Bank 2000).

Despite this commendable effort, because of its size and large regional disparities China still has tens of millions of poor. Thus, measures of absolute income poverty using international standard poverty lines of population living under 1$ a day indicate that 18.5% of the population, or 230 million people, could be considered as absolute poor in 1998. Using national poverty lines reduces the rate to 4.6% in 1998, but this still represents some 60 million poor (World Bank 2000).

Within this context, what is the role of and forestry? Questions of this kind have been addressed, to a certain extent in other sectors (especially in agriculture and industry) and at the macro level, but the “social impacts” of the policy reforms as experienced in the forestry sector are relatively poorly documented. Given the little empirical analysis on which to draw, we have undertaken an extensive review of the available literature, in English and in Chinese, that has been used to feed into our own fieldwork. Our analysis is based in a -grounded knowledge of the bamboo sub- sector in China resulting from six years of field research. In the absence of sufficient information on which to base generalized conclusions, we will follow an inductive approach. We acknowledge that bamboo production and processing have some specific traits that may not apply to other forestry sub-sectors. We also believe that it may bridge the gap between the conventional focus on timber and its derivatives on the one hand, and ‘economic forests’, in Chinese terminology, such as fruit orchards or tea , on the other hand. Indeed, some of these forest products have been incorporated as part of our detailed socio-economic studies, helping us to derive some conclusions that go beyond the bamboo focus.

We begin with a brief examination of the issue of poverty and forests. It is a very large topic; we attempt to enumerate the key issues, and then set out scope for this discussion. We then discuss the important link between agriculture and forestry in China, and go on to introduce the bamboo sector in the country. This is followed with a an explanation of our research, in three phases, and the key findings from this work with a focus on how reforms in land and resource tenure, investment, trade, industry and environment have influenced productivity, growth and the distribution of wealth in this sub-sectors. We conclude by drawing out the lessons that can be applied more broadly to the forest sector in China.

Poverty and forestry.

Forests and forestry play important roles in people’s livelihoods and in development. Though the precise role is situation specific, some of the main contributions are as:

1. safety net for poor people who can rely on forest and income in times of hardship 2. source of subsistence foods (fruits, nuts, roots and tubers, ) and fibres for self- consumption 3. source of fodder, manure, and other agricultural inputs 4. main or supplementary source of barter commodities or income 5. opportunity to invest surplus labor 6. source for capital accumulation for investment 7. source of raw material for processing industries

8. down-stream processing creates employment and income generation (with a positive feedback loop between rural development and rural industrialization as jobs are created, conditions/wealth increases, people choose to stay in the area, etc.) 9. land base for agricultural expansion 10. watershed and ecological services 11. basis for eco-tourism and other non-consumptive uses

And of course, it is a two-way relationship. Some argue that poverty leads people to degrade forest resources. Development affects forests through market demand and responses.

In a country as big and diverse as China, it is likely that many examples of all of the above could be found. Thus, the analysis of poverty and forestry in China must be multifaceted and should take into account the specific conditions being presented.

As in most developing countries, rural populations in China have disproportionately high levels of income poverty. Rural average per capita income is less than 40% of urban average income, and rural living expenditure less than 35% of urban living expenditure (CNBS 2000). The nature of poverty is different in rural and urban settings as well. In the Chinese context, land has been distributed in a rather egalitarian way within each village. Poverty in rural areas has less to do with food security than with a generally lower level of social services (health, education) and higher vulnerability when compared with urban areas (Jalan and Ravallion 1999; Liu et al. 1999).

Most authors concur that the development process in China has also led to increasing individual and regional differences (Lyons 1991; Khan et al. 1992; Bramall and Jones 1993; Beresford and McFarlane 1995; Tsui 1996; Ke 1996; Xiaobin 1996; World Bank 2000). Per capita gross domestic product in the South-Western region is only 44% of that in the Eastern coastal areas (CNBS 2000), and the gap has been steadily increasing in recent times. Minority Nationalities are particularly stricken by poverty; with around 9% of the total population of China, they count for around 40% of absolute poverty in the country (World Bank 2000).

Remoteness and isolation, together with natural handicaps, have much to do with poverty, as can be epitomized by the mountainous and dry regions of China. Four hundred ninety six of the 592 poverty stricken counties in the country in the mid 90s were in mountainous areas (CFAP1995). And it is frequently in these regions, less accessible and with natural constraints limiting intensive agriculture, that forests have been preserved. It is, therefore, common to find a pattern of isolation, poverty and relatively large forest cover, where it is difficult to disentangle the causal links.

It is quite likely that in remote areas and among minority populations, the safety and subsistence values of forests are the most important. It is also among these populations where cash income from trade in NTFP will be most important. The massive that has occurred in China has no doubt resulted in severe negative impacts on people who rely on these resources. At the same time, a major effort has been done to expand forest cover in these regions. Most World Bank funded forest projects have focused on poor areas, what has led Rozelle et al. (2000) to conclude that they have been good for poverty alleviation. However, evidence cited by Sayer and Sun

(this volume) suggests that current re- and efforts that focus on exotics and low-diversity plantations will not reverse this trend and may exacerbate it.

The co-occurrence of forests and poverty leads to an ambiguous connection that can be interpreted in contradictory ways, depending on perspective. There is a correlation between high dependence on forests and poverty, and the depletion of forest resources that has been denounced by many authors (Nin and Harris 1996; Smil 1997; Harkness 1998) can aggravate poverty.

This is compounded by the poor performance of most forest industries when compared with the situation of the whole industrial sector in China (Research Group of Forestry Economics 1998). The Third National Industry Survey showed that financial losses are common in all forest industries, with State-owned enterprises faring the worst. The average deficit of industrial forest enterprises was 13.9 percent points higher than the national average for industry during the same period (SFA 1999). Consequently, forest workers have among the lowest standard of living in China (Binghao and Lu 1999), with forest salaries appearing at the bottom of the list of over 60 categories or sectors published in the national statistics, and representing only 55% of the average national average salary (CNBS, several years). Seen from this perspective, the vicious circle of ‘poverty –– poverty’ that characterized past forest interventions (i.e. continued expansion despite poor performance) (Kejian and Yang 1996), or the syndrome ‘the more you cut, the poorer you are’ in reference to the situation of many enterprises (Xu and Zhang 1999) can be easily understood.

At the same time, forestry often represents the main, or even the only, income generating activity in many of these poverty-stricken regions. Although at a national level forestry contributes only 2% to farm-derived rural cash income (CNBS 2000), it is an important source of income in income-poor but forest-rich counties, where up to 70%-80% of the revenue can come from forests and forest-related activities (Da 1999; Zhang 2000). A significant part of public investment for rural environment and natural resources protection go to afforestation projects, contributing to employment creation (Rozelle et al. 2000). Indeed, forest industries often constitute the only industry present in poor counties, being both one of the pillars for the development of the local economy and an important taxpayer (Zhang and Yuan 1999; Peng 1999).

Li and Veeck (1999), in their study of forest resource use and rural poverty in China, explore the contribution of forests to rural income in poor areas. They found a significant overlap between counties officially classified as having abundant forest resources (Senlin Fengfu Xian) and severe poverty counties (Pinkun Xian). Using multi- county models based on county and provincial level statistics they found no relationship between forest variables and income, concluding that the availability of forestry opportunities and forest resources contribute only very slightly to per capita income. Thus, for these authors forestry activities in rural China are not making the direct contributions to people’s livelihood that the sector could, and should, be making, even in forest-rich counties. Although informative and thought provoking, the work of Li and Veeck does not help us to understand the contradictory evidence and perspectives on forestry and rural poverty.

The question, therefore, arises: do forest resources and forestry activities promote rural development in China or are they part of the poverty trap? We shall try to offer some

elements to explore it and to advance in the analysis of forestry and poverty based on our research on the bamboo sub-sector.

Farmers options in the context of China’s forestry.

Despite having one of the lowest per capita forest endowments in the world and only about half the world average forest cover (in % land area) at the national level, China’s forest sector stands as one of the largest in the world. It is also one of the most diverse, both in environmental and socio-economic terms.

Forestry in China is very much linked to agricultural activities, with forests and plantations normally playing a supplementary or supportive role both from a management and income generating point of view (Westoby 1987; Tapp 1996). This is reflected in the unusually broad definition of forestry applied in China; forest cover includes most forms of or bush cover, such as tea and many fruit and , that would appear as part of the agricultural statistics in most countries. These are designated as “forest fruits” or “economic forests”. It is common to have several ministries involved in the management of these economic forests, occasionally resulting in poor coordination among them, as epitomized by the case of the tea2 (Etherington and Forster 1996). At the same time, the production value of a number of these orchards and tree- based food production systems is commonly accounted as agricultural production, thus creating an imbalance between official land-use statistics and their corresponding production value. This leads to an underestimate of the value of forestry and of growth in the forest sector (Li 1996).

This fact has more than an anecdotal importance; it affects forest investment and development plans and farmers’ options for forest management, and has a direct influence on how forestry in the broad Chinese definition contributes to poverty alleviation. Forestry departments at different levels in the administration, as sole authorities or in conjunction with other departments, have the mandate to implement development plans in forest land. Designated forest land normally cannot be converted to other uses without the corresponding planning permission. Most wasteland conversion plans require that land to be converted into forest or . Likewise, the Natural Program and similar programs elsewhere in China have as their main thrust the afforestation of arable land in steep slopes.

At the same time, farmers are interested to maximize their profits within the constraints of the land use plan. In this context, if given the option, farmers prefer to fruit trees, economic forests or bamboo on land earmarked for re-/afforestation. These products have increasing demand and are far more profitable than timber, which requires long-term investments and is subject to greater market uncertainty and heavy taxation3. There is ample evidence from all over China to support this point. It can be seen in the conversion of slash and burn to rubber plantations in (Cao and Zhang 1997); in and bamboo plantations in the Integrated Mountain Development Plans (Wang and Zhao 1999; Forestry Economics Editorial Board 1998);

2 Etherington and Forster (1996) report tea farmers in Yunnan saying with sarcasm:’ One bush, three policies, and three departments on charge’. 3 Zhao (2000) suggests that pursuing non-timber forest products (fruit trees and bamboo) may also have to do with tenure security as farmers who planted timber trees cannot cut them now under the NFPP in Simao Prefecture, Yunnan.

in the authors’ fieldwork experience in several counties; and even in poverty alleviation programs through forestry activities in the Loess Plateau, replacing many of the former shelterbelt program activities (Joint Survey Group 1999).

Economic forests also constitute one of the main land-uses being established in auctioned wastelands (Hanstad and Li 1997; Yu et al. 1999). Interestingly, fruit and nut trees are also often the main type under the NFPP, predominating over timber and ecological plantation forests (Zhang 2000). This has given rise to criticism that the environmental aspects of the NFPP have been undermined (Zhu 2000).

To be sure, conventional (i.e., timber oriented) forests still represent the largest amount of forest land in China. They are the dominant focus of forest institutions at different administrative levels, and many farmers are engaged in their management and expansion of plantations even if they are also planting economic forests (Zhang 1996; Tapp 1996). A common pattern is to have fruit trees and bamboo in more accessible areas, normally under individual farmer household responsibility system, contract management or auctioned land. Timber plantations remain in the more remote places, and are managed as individual plots, joint stock cooperatives or through joint agreements between farmers and forest farms (Kejian and Yang 1996; Zhang 1996).

The key point is that, under present circumstances, and given the option, farmers, forest farms and forestry authorities4 are actively engaged in the expansion of fruit and nut trees and bamboo plantations, which are considered more profitable than conventional timber plantations, but are still classified as forestry activities.

The best indication of this trend is the increase in the area and the output of economic forests, from 6.1 million ha and 7 million tm output in 1978 to 21.9 million ha and 53 million tm output in 1997, ranking China as first in the world in area and output for such crops.. This change has been reflected in changes in the structure of rural markets; it has promoted rural development and relieved poverty (Lei 1999). Likewise, bamboo plantations have increased from 3.2 million ha and 4.4 million tm output in 1980 to 4.3 million ha and 14.2 million tm in 1999 (Ruiz Perez et al 2001). Thus, while conventional (i.e., timber) forests have been depleted and timber-based forest industry is showing signs of stagnation, economic forests and bamboo plantations and their associated industries are thriving, offering farmers good opportunities to increase their income and to rise out of poverty.

This is a key point to keep in mind when analyzing the social aspects of forestry and poverty alleviation, which is normally seen from the perspective of conventional (timber) forestry. This fact can also help to explain the contradictory results of Li and Veeck, who do not differentiate between types of forests in their work, as well as some of the ambiguities in the analysis of causal relations between forestry and poverty.

We now move to present some results of our work in the bamboo sector in China.

The bamboo sub-sector.

4 In fact, under the Chinese institutional system many forestry bureaus we have visited, further from promoting fruit and nut tree crops, are also engaged in off-forest activities, like hotels, restaurants and other non-forestry related industries, showing a surprising level of diversification of economic activities.

Bamboo is a broad category with between 300 and 500 species in China (depending on taxonomic criteria), of which over 100 are used for different purposes (Zhu et al. 1994). The most common is ‘moso’ bamboo ( heterocycla), that occupies 2.8 million ha. There are two main categoreis of uses of bamboo. The culms (stems) are used in timber-like applications either in unprocessed form (poles, ) or in a variety of processed forms (panel boards, bamboo flooring, and paper). Edible bamboo shoots5 are used as a vegetable, fresh, or in a variety of processed forms. Because of this dual utilization, bamboo has economic characteristics of both conventional timber-oriented forests and fruit-producing cash trees.

Bamboo plantations have attractive attributes for farmers: they have short rotation cycles, low investment costs, yearly or biennial production, and multiple uses that allow for flexible markets. They are also more profitable than timber trees. Data from forest bureaus in different counties where we are conducting fieldwork (see below) indicate that bamboo generates between 4 and 8 times more income per unit of land than the classical Chinese fir or Pinus plantations. Consequently, when environmental conditions allow, farmers find bamboo more attractive than timber plantations, and there is an active process of replacement of conifers by bamboo.

The importance of bamboo at a national level is reflected by the fact that, while bamboo represents only 3% of total forest area, it contributes to around 25% of forest exports. The total value of bamboo raw material and industrial production in 1999 amounted to 23.14 billion RMB yuan (US$2.8 billion) (SFA 2000).

Under the China Forestry Action Plan bamboo was meant to expand by 1.2 million ha by the year 2010, doubling the total production of the mid 1990s (MoF 1995). This expansion is currently well under way, and it has been boosted by the ban that has increased demand for timber substitutes. Bamboo culm production has increased by 30% since the logging ban was decreed, prices increased 5% to 10% in 1999, and new bamboo plantations increased by 16.7% in the same year, representing the fastest growing new forest plantations in that year after the industrial plantations (MoF 2000). By 2010 it is expected that bamboo will substitute for 29 million m3 of (CFIC 1999), prompting some senior officers at the State Forestry Administration to suggest that bamboo could be the dominant forest industry in China by 2050 (Li and Xu 1998).

Bamboo-based development in .

Our first research6 on the bamboo sub-sector was based in Anji county ( Province), one of the ten ‘bamboo counties’ in China. County level time series statistics, key informant interviews, and detailed surveys of farmers (random sampling distributed in 8 villages) and the bamboo industry (stratified sampling distributed in the whole county) allowed for a characterization of the role of bamboo in Anji, its contribution to

5 There are some marginal uses like drinks, medicinal applications, and even flavoring/coloring for rice, that would not fall in either of these two main categories. 6 The early CIFOR research on bamboo in China was done in collaboration with the Research Institute of Subtropical Forestry (RISF), the China Forestry Economic and Development Research Center (FEDRC), both of them part of the Chinese Academy of Forestry, and the International Network on Bamboo and (INBAR). Subsequent studies were conducted by RISF, FEDRC and CIFOR.

income generation and the analysis of how policy changes have affected the sub-sector (see Ruiz Pérez et al. 1996; Zhong et al. 1998; Ruiz Pérez et al. 1999). The results show that farmers responded quickly to the Contract Responsibility System (CRS, analogous to the Household Responsibility System for agricultural land), with a 19% expansion of bamboo plantations7 since 1980 and a 97% increase of bamboo culm production in the same period. Further from the CRS, three key policies that have helped the increase of bamboo production were: a) the first reform of the marketing system in 1980 allowed for the development of the collective and private bamboo enterprises in the ‘80s. This shifted the industrial base of the county, with local bamboo processing increasing from 8.4% in 1980 to 66.8% of the county’s industrial output (value) in 1998. The increase in local processing of bamboo, for which we have ample evidence in other counties (Ruiz Pérez and Belcher 2001), has also been reported for the whole forest sector (CFIC 1998)8. b) the implementation of the ‘Open Door’ policy in Anji in 1988, which allowed for the establishment of joint ventures with enterprises outside Mainland China9, bringing fresh investment and new technology and markets. c) the reform of foreign trade policy in 1988, allowing for county level industries to directly negotiate exports. This shifted the focus from an exclusively domestic market to an export oriented production. The Anji Foreign Trade Co. lost its monopoly position in 1988 and exports boomed to reach US$56.3 million in 1998, representing 64.2% of the total county exports.

As a result of these policy reforms, bamboo production and processing expanded tremendously. There were just 18 bamboo factories employing 397 workers in Anji County in 1978. By 1998 there were 1,182 factories and 18,914 workers (of which over 60% are women), representing 50% of total industrial employment in the county (Zhong et al. 1998). By 1998 123,800 farmers, 63.2% of all farmers in the county, were engaged in . Bamboo constitutes 14% of average farmers’ income in Anji (Anji Forestry Bureau), and 25% of income for those farmers engaged in bamboo plantation (Ruiz Pérez et al. 1999). Off-farm income (construction, services and to a large extent bamboo processing industry) represents the largest source of income (42.6%) in the sample. Our research shows that middle income farmers have benefited the most (on a relative basis) from the expansion of bamboo, seizing the opportunity to significantly increase their income. The richest farmers get more absolute income from bamboo than the middle income farmers, but the relative contribution of bamboo to their household income was smaller. At the same time, poor farmers have benefited least both in absolute and relative terms. We also found that while the rate of income growth in each of the eight sampled villages was similar, the absolute income

7 This increase is noticeable less than the 35% increase of bamboo plantations for the whole of China during the same period. The reason is the high opportunity cost of land in Anji, where bamboo has to compete with other highly profitable uses. 8 While this trend has helped to correct a classical inefficiency of the Chinese forestry industry, it has also resulted in procurement difficulties for many large State Forest Enterprises because many wood producing areas now control or block the outflow of superior quality timber in order to process it in their recently established enterprises (CFIC 1998). 9 The based New Continent Co established the first bamboo joint venture in Anji in November 1988.

differences increased from the late 80’s to mid 90’s due to differences in starting points for each village10.

The key conclusions from this first study were that, in this reputed bamboo-specialized county, policy changes paved the way for a huge expansion of bamboo production and processing, offering farmers good opportunities to allocate labor and investment. Although poor farmers have also benefited, this process has been most beneficial for middle income farmers, while rich farmers find proportionally more opportunities than the rest from off-farm activities. The key to the success has been the strong link between the raw material production and the processing industry, offering an excellent example of rural industrialization based on local resources. Recent trends show a gradual incorporation of environmental considerations in bamboo forestry in Anji in an attempt to tap from tertiary sector forest-based activities (green label, ecotourism, provincial and national level funds for environmental services, Ruiz Pérez et al. 2001).

Multi-county comparison of bamboo-based development.

Anji County, although mountainous, is not a poor county, being located in the rich Zhejiang Province with easy access to the big markets of Shanghai and Hangzhou, and direct links to international markets. In the next stage we wanted to analyze trends and to test these findings in a wider set of conditions, thus expanding the survey to cover six counties in an East-West gradient within the subtropical region of China. These included Anji and Longyou (Zhejiang Province), Pingjiang and Taojiang (Hunan Province) and Changning and Muchuan (Sichuan Province) (see map). The survey included county level time series statistics for the period 1980 - 1998 and key informant interviews for the six counties, as well as detailed farmers and industry questionnaires for three of them (Longyou, Pingjiang and Muchuan).

Some results of the six county comparison are reported in Ruiz Pérez and Belcher (2001). Per capita income was significantly higher in the two Eastern counties (Anji and Longyou) than in the rest. Per capita income in Anji, the richest county of the set, is 4.7 times higher than in Pingjiang, the poorest. More important, Anji and Longyou11, the two Eastern counties, have outperformed the national rate of GDP growth with an average of 12.8% and 10% respectively for the period 1980-1998, thus contributing to an increasing regional differentiation (figure 1). Interestingly, the poorest counties, Pingjiang and Taojiang, from the Central Province of Hunan, experienced the lowest rate of GDP growth. The differences have been particularly marked in the last decade. This is concordant with the above-referred findings by different scholars who have studied income distribution in China.

10 These results have been contested by Kant and Chiu (2000). Based in their survey of one village in Linan County (Zhejiang), they argue that the poorest farmers have benefited most from bamboo and that the income differences (measured by Gini coefficients) have been reduced. There are important methodological differences between our work and that of Kant and Chiu. Notably, we used quintiles to define five equal-sized income groups, and our sample was spread randomly in 8 villages in Anji. Kant and Chiu use three income classes based on official income definitions, resulting on very unequal number of farmers per class; since they only worked in one village they couldn’t measure inter-village differences, which are the main source of differentiation in our study. 11 Longyou was established as a separate county in 1983; therefore, all time data start in that year.

In all cases a stable policy environment was consistently reported as the main pre- condition for the expansion of bamboo. This expansion, while having occurred in the six counties, shows interesting differences (see figure 2). Anji and Longyou, the rich Eastern counties with high opportunity costs of land, have expanded least, whereas Muchuan and Changning, the two counties from the West, have expanded most12. This has been stimulated by the growth of the paper industry, dominant in both of them (see below), and incentives and regulations prohibiting agriculture on slopes above 25º13, which are abundant in these counties. Taojiang suffered a severe bamboo locust plague in 1983 that affected 25% of the county, sharply reducing production and limiting the expansion of bamboo for several years.

Bamboo has expanded faster than average in the forest sector during the period studied, as indicated by the fact that the contribution of bamboo to forestry increased in all counties (table 1). The slowest increase occurred in Changning, where bamboo already represented 72.4% of total forestry output in the early 1980s, thus being close to a natural ceiling of expansion within the forest sector. Developments in Anji are also interesting: the bamboo contribution to forestry has stabilized since the mid 1990s due to the important growth of cash trees (fruit and nuts), which find a thriving market in the rich coastal cities. This clearly shows that, within the forest sector, bamboo has represented a better opportunity for farmers than most of the conventional forestry activities, both as raw material production and associated processing industry. Consequently, the number of farmers with bamboo plantations in the six counties grew from 244,000 to 465,000. An estimated 26% of total farmers in the six counties studied had bamboo plantations in 1998, as compared with 18.8% in 1980.

The behavior of bamboo prices relative to other commodities has influenced the expansion and, especially, the intensification of bamboo plantations in all counties. Until 1994 bamboo prices grew faster than the national consumer price index, offering the right economic signal for expansion and a sustained intensification (Gu 1992). Price stagnation and even relative price decreases from 1994 to 1998 put a brake on the intensification process (measured in terms of bamboo stand density), although bamboo area continued expanding. Since 1998 the logging ban and the increasing demand for bamboo as a substitute for timber have created a new stimulus for expansion and intensification of bamboo plantations.

Table 1.- Percent contribution of bamboo to total county forestry output

County 80-83 96-98 increase Anji 48 77 29 Longyou* 18 55 37 Pingjiang 12 33 21 Taojiang 44 82 38 Changning 72 80 8 Muchuan 12 75 63 *it refers to period 1983-1986

12 While bamboo for the production of culms (from moso bamboo, Phyllostachys heterocycla, in the East and Center, and from Sinocalamus affinis in the West) is still dominant, there has been a process of diversification and expansion of bamboo for production in all counties. 13 This process started already in the mid 80s, much earlier than the NFPP, and was helped with local, national and international funding, including World Bank loans.

Bamboo has higher productivity in the East than in the Center (this cannot be compared in the West due to the use of different bamboo species), with Anji, the richest county, having the highest average production (25 culms / mu) while Pingjiang, the poorest, has the lowest (only 7 culms / mu). Although environmental differences (, slope and ) may influence the productivity in each region, this is consistent with the expectation of higher farmer’s specialization, capital availability and opportunity costs of land and labor in the richest counties, where farmers would invest more in their bamboo plots.

The comparison between collective, state and HRC management systems can be done using bamboo density as a proxy for intensity of management. This is possible for the counties in the East and Central provinces. In Muchuan and Changning there are monopodial and sympodial bamboo with different clumping behavior and planted in different proportions within each ownership type, making impossible any comparison based on county level statistics. Figure 3 shows the density for each type of ownership, calculated as percentage, with the average density for each county represented as 100%. In general, the collective bamboo plantations tend to have lower bamboo culm density than state and household managed plantations, as would be expected. The comparison between the state and household managed plantations doesn’t show a clear trend. While in Anji and Taojiang the state plantations have higher density, in Longyou and Pingjiang the household managed plantations have marginally higher density. This is mainly due to economies of scale in state plantations (especially in Taojiang, where there is a large state bamboo farm) and the possibility of benefiting from technological improvements (particularly in Anji, which has a well-established tradition of cooperation with Hangzhou University and the RISF).

Altogether, bamboo industrial output grew exponentially in the six counties studied during the period 1980 – 1998, with variations reflected in the relative expansion of bamboo plantations and processing industry as explained below. The combined output value increased from 20 million current yuan (13 million US$) in 1980 to 2,046 million yuan (247 million US$); the number of enterprises grew from 259 to 6,543; and the number of workers engaged in the industry increased from 5,925 to 93,300. While state bamboo output has remained stable or decreased slightly, the collective (township and village) and private industries have led the expansion of the sector, in a process that parallels the general of industrial development in China (Jefferson and Rawski 1994; Jefferson and Singh 1999).

The contribution of bamboo industry to total industry output gives an indication of the relative advantage of bamboo and the level of industrial development of each county. This contribution is a function of the absolute magnitude of the bamboo sector and of the general level of industrialization in each county. Figure 4 shows three different trends in the contribution of bamboo industry to total industry output (time series smoothed using 3 year moving average). 1. Anji and Longyou, the Eastern-most and richest counties of the set, have a common pattern of increase in the 80s, but start to lose ground in relative terms in the early 90s. Industrial development based on bamboo seems to have been instrumental in the early stages of rural industrialization, while becoming less important in a more advanced or mature industrialization process as the one experienced in these two, most developed, counties.

2. Taojiang, and in a less marked way, Muchuan, show an increasing contribution of bamboo industry in total industrial output. Taojiang, which started from a very low level of bamboo processing, has taken off in the early 90s. Bamboo processing industry in Muchuan, which was already well established in the form of bamboo paper mills, managed to further increase its contribution thanks to the huge expansion of bamboo plantations (see above). 3. Bamboo industry in Changning and Pingjiang experienced a reduction in its total contribution to industrial output for most of the period, albeit for different reasons. In the case of Pingjiang this was due to the collapse of the bamboo fan factory (the largest in China), that was the main consumer of bamboo raw material in the county14. In the early 80s Changning’s industry was almost exclusively based on bamboo, which represented 89% of total industrial production in the county; this role has been decreasing as other industries have arrived.

Bamboo industry is highly diversified, particularly in Anji and Longyou. There are cases of strong dominance of one single type of processing, such as the paper industry in the Western counties of Muchuan and Changning (accounting for 99% and 54% of total bamboo industrial output respectively) and bamboo mats in Taojiang, that represent 84% of total bamboo industrial output. Our sample suggests that there is no clear relationship between industry diversification and expansion of the bamboo sector. However, high dependency on one type of industry offers less opportunities to readjust in case of abrupt changes, leading to stronger bamboo price fluctuations as has been the case of Muchuan since 1995 with the strong competition of the domestic paper sector with foreign imports.

Finally, it is worth stressing the general trend towards increasing percentage of local processing observed (table 2), as mentioned above, with the exception of Pingjiang due to the collapse of its large bamboo fan factory (see footnote 14), and Muchuan, that already had all its bamboo culms locally processed by the paper industry at the beginning of the 80s15. This trend has also been reported for different forest industries, and has a positive feedback loop in the general expansion of bamboo.

Table 2.- Percent of local processing of bamboo culms

County 80-85 95-98 increase Anji 14 62 48 Longyou* 10 71 61 Pingjiang 41 23 -18 Taojiang 38 100 61 Changning 23 88 65 Muchuan 100 100 0 *it refers to period 1983-1985

14 Since then most bamboo from the county was sent to other counties to be processed. Pingjiang Forestry authorities have been working in the establishment of a plybamboo and bamboo flooring factory that was being built last year. This will raise again the contribution of bamboo industry to total industrial output. 15 In Muchuan and Changning data refer to sympodial bamboo, the dominant species grown. There is some monopodial bamboo (mainly Moso bamboo) which is partly processed locally and partly sold as raw bamboo to other counties.

The role of bamboo in farmer’s income.

Detailed surveys were conducted in Longyou, Taojiang and Muchuan. Each of these counties has different conditions which are reflected in the response of farmers to opportunities to plant bamboo. However, there are some common trends in the three counties.

Income disparity among farmers was measured using the Gini index. There is an East – West gradient in the index, with Longyou having a Gini index of 25.0, Taojiang 29.1 and Muchuan 31.6. Income differences, as measured by Gini index, tended to increase from the period 1989 -90 to 1995-9616, (figure 5). This trend coincides with numerous studies that have analyzed income disparities in China since the beginning of the reform period as mentioned above, and supports our earlier findings in Anji (Ruiz Pérez et al. 1999). This increase was larger (6 points) in Taojiang, the county with lowest average per capita income, and smaller (1 point) in Longyou, the county with highest average per capita income. The increase in the Gini index was generally due to increasing income disparity from agriculture and off-farm activities, whereas income from bamboo showed a consistent reduction of the Gini index for the three counties.

There is a clear process of adoption of bamboo plantations by farmers as a strategy to increase their total household income during that period, as shown in figure 6. In the case of Taojiang, the new bamboo processing industry (mainly bamboo mats) that began at the early 1990’s allowed for a degree of pre-processing by farmers, who compensated in this way for the slight decrease in the contribution of bamboo raw material to total household income recorded during the period17.

This process of adoption has been followed by a large number of farmers, as can be seen in figure 7, that shows a spread of income in constant yuan of 1990 in the three counties18. This spread has been less marked in Taojiang (the county where bamboo plantations grew less during the 20 year series based on county level statistics), and most pronounced in Muchuan, where the largest expansion of bamboo plantations took place. This is consistent with the magnitude of reduction of Gini index for bamboo income, with Muchuan showing the largest reduction and Taojiang the smallest (figure 5). These data support the conclusion that bamboo offers a superior opportunity for farmers’ allocation of productive resources.

We turn now to discuss how this opportunity has been realized among different income categories of farmers. To do this, we define three equal percentiles19 of income in each county, and proceed to relate the percentage of household income derived from bamboo and from bamboo plus processing for each income category (figures 8 to 10). As can be seen, there is a general trend for middle and high income farmers to have proportionally

16 Moso bamboo sprouts every two years, having an effect on farmers’ income. In order to minimize it, we use two-year averages to compare changes in income during the period of reference used in the questionnaires, that covers from 1989 to 1996. 17 We could not consistently differentiate bamboo processing from other type of farm processing, therefore the data refer to all farm level processing. However, most of it corresponds to pre-processing of bamboo for the county-based bamboo industry. 18 The range of the axis has been selected to match each county condition. 19 In our earlier work in Anji we used five quintiles of income. We have conducted analyses for five and three income groups, with similar results in general terms. We report here three income categories in order to simplify the presentation.

more income from bamboo and bamboo processing than the poorer farmers within the same county. In Taojiang, this trend does not apply to bamboo raw material, but does occur when considering bamboo plus its processing.

Moreover, the contribution of bamboo to household income has increased most in the farmer groups with the fastest income growth, as seen in the right part of the figures. This would imply that bamboo related income (either as raw material or combined with bamboo processing) has been a driving force in the development of the three counties, as represented by its role in the more successful (in terms of increased income) farmers. This proposition has been tested statistically using one way ANOVA (see table 3).

Table 3.- Oneway ANOVA for percentage of income derived from bamboo within classes of income change.

Muchuan Taojiang Longyou ANOV signif. ANOV signif. ANOV signif. A A A % bamboo 6,264 0,003 1,696 0,189 2,730 0,070 % bamboo 0,349 0,706 4,721 0,011 4,570 0,013 & processing

Three out of six tests are statistically significant at 0.05 level, and one of them is close to the significance level. When we conduct pairwise comparisons instead of oneway ANOVA for the three groups simultaneously we find a high number of significant differences.

These results support part of our findings in Anji, indicating in particular that bamboo is not a ‘poor man’s timber’. On the contrary, when bamboo (and presumably other forest products) has a leading role in farmers’ economic development, as is currently the case in many regions of China, the poor benefit proportionally less from its potential. However, in Anji we found that it was the middle-income and not the high-income farmers who benefited most, whereas in the extended sample of three counties it is the high-income farmers who seem to have gained the most advantage20. In the case of Anji we described this by placing the middle income farmers between those who don’t need bamboo (i.e., the richer farmers who can earn more income from off-farm activities) and those who can not take full advantage (i.e., the poorer farmers, because they do not have the conditions to make the most of the opportunity). However, Anji is far richer than the rest of the six counties in the comparison, with per capita income twice as large as the next richest, Longyou. We propose that as the counties develop, the role of bamboo as one of the driving forces will become less important, giving way to other more profitable activities (normally outside the farm) that will be taken up by the more entrepreneurial farmers. Thus the relative contribution of bamboo to the income of those farmers will reduce, reproducing a Kuznets-type of process.

20 The difference in percentage of income from bamboo between high and middle income farmers tends to be small, whereas the difference of these two income groups with low income farmers tends to be larger and statistically significant.

The increasing contribution of off-farm activities to household income as we move from poor to rich farmers is confirmed for Muchuan and Taojiang (see figure 11). Contrary to our expectations, this is not the case in our sample in Longyou, the more developed of the three counties studied in detail, where middle income farmers get proportionally more off-farm income than the other two groups. This is mainly due to the opportunity created by tea, bamboo and other non-timber products in Longyou, that offer good remuneration to a specialized group of farmers, all of them within the high income category, and that can compete with off-farm opportunities21.

The importance of the processing industry in the three counties.

As mentioned above, bamboo processing industry has grown in all counties studied, offering a good opportunity for farmers to expand their activities and to derive part of their income from farm-based semi-processing or off-farm work in processing enterprises. The bamboo industry profile has marked differences among the three counties, both in its current composition and the trend for the last 20 years (see figure 12).

In Muchuan bamboo paper dominates, with ownership shared between private and collective enterprises. The growth has been strong and sustained during the last two decades, and has been based on the expansion of bamboo resources (see figure 2 and table 2). Taojiang’s bamboo industry is dominated by bamboo mat manufacturing and is almost completely privately owned. This industry has grown explosively since 1992, with a high increase in local processing. Increased demand for raw material has been met with a 117% increase in moso bamboo culm production mainly through intensification, with little expansion of bamboo area. Longyou’s industry also has increased, albeit less sharply than in the other two counties. Like in Taojiang, its growth has been mainly based on an increase in local processing, coupled with an intensification process and little expansion of bamboo area, resulting in a 300% increase in moso bamboo culm production, and a spectacular 5400% growth of shoot production. Output is divided between plybamboo, bamboo and a variety of other products (including , paper, flooring, mats and brooms). Ownership is mainly shared between collective and private, with some state enterprises involved.

In order to understand the process of bamboo industry expansion and the contribution to the county economy we have gathered in table 4 information based both on official county level statistics and a sample of industries for each of the three counties. The bamboo industry questionnaire was targeted at medium to large size enterprises for each main type. Therefore, the data are not a random sample and should not be taken as representative of the whole bamboo industry in each county. However, they offer a good view of basic industry conditions in the leading enterprises for the three counties.

Table 4.- Basic data of bamboo industry in the three counties.

21 There are two outliers o ne having 200 mu (13.33 ha) of tea and another having 20.5 mu (1.36 ha) of other tree crops. These two farmers belong to the high income category and obtain most of their income from agriculture (mainly tea and fruit orchards), thus biasing the results. Their removal from the analysis results in off-farm activities having also the highest relative contribution for the high income group of farmers in Longyou.

Muchuan Taojiang Longyou * number of enterprises in 1980 57 43 29 number of workers in 1980 867 1700 291 workers per enterprise in 1980 15 40 10 total output in 1980 (million yuan 1990) 3.52 1.11 3.12 Productivity per worker in 1980 (1000 4.1 0.66 10.72 yuan 1990) % bamboo industry in total industry in 7.5% 0.6% 1.8% 1980 number of enterprises in 1998 1890 2600 672 number of workers in 1998 8240 54450 4385 workers per enterprise in 1998 4 21 7 total output in 1998 (million yuan 1990) 166.37 317.80 95.24 Productivity per worker in 1998 (1000 20.19 5.84 21.72 yuan 1990) % bamboo industry in total industry in 35.8% 12.1% 2.6% 1998 % of industry in county GDP 29% 34% 49% number of enterprises in sample 12 8 29 % of total bamboo workers in sample 18% 14% 24% average salary in 1996 4200 4900 4800 % of women in total workers in 1996 46% 47% 62% % women salary compared to men salary 89% 81% 85% in 1996 % gross profit in 1996 24.4% 18.6% 8.4% % exports in 1996 16.5% 1.5% 2.1% * Early data refer to 1983

Muchuan already had a long established paper industry. Its growth is associated with both the expansion of the general demand for paper in the country and the specific demand for ritual bamboo paper, used in family and other religious ceremonies to honor the ancestors22. In Taojiang it has been the bamboo mat industry, non-existent in the county before 1992, that has led the way. In Longyou the main expansion has come from the bamboo shoots and from plybamboo manufacturing, in high demand for the construction industry and others.

The three counties have experienced an increase in productivity per worker in constant yuan. The increase has been highest in Taojiang, which had the lowest productivity in the early 80’s and where the fastest expansion has taken place. Productivity is highest in Longyou, the most developed of the three, followed closely by Muchuan. In the case of Muchuan, this is related to the low labor intensity of the paper industry, especially for the large, mechanized mills.

There has been a decline in the number of workers per enterprise. This is mainly due to the large expansion of private, frequently family-based enterprises that tend to be smaller (Broadman 1995; Smyth 2000). The growth has been more marked in Muchuan

22 Muchuan has a reputation in China and abroad for its ceremonial bamboo paper. Traditional, small- scale bamboo paper workshops account for the largest increase in enterprises and jobs during the period.

and Taojiang than in Longyou, where collective and state-based production (usually in larger units) has kept pace with private production.

Bamboo in Muchuan has the largest contribution of bamboo industry to total industrial output (35.8%), whereas Taojiang, as expected, shows the largest increase, from 0.6% in 1980 to 12.1% in 1998. Bamboo industry in Longyou made a very small contribution to total industrial output in 1983 and had not made a significant increase by 1998. More importantly, in Muchuan and Taojiang, with about half the per-capita income of Longyou, there has been a steady increase in the relative contribution of bamboo industrial output; in Longyou bamboo processing reached the peak of its relative importance in 1991 with 6.7% of total industrial output, and has showed a steady decline since then.

We discussed this trend above in the six counties comparison and suggested that these differences can be explained in the context of different levels of development and the role of bamboo in an early or more advanced industrialization process. We would like to support this analysis based on some data from the enterprise questionnaire.

As mentioned above, forestry wages are among the lowest in China, representing 55% of the national average in 1999. The average bamboo industry salary in Muchuan in 1996 was 4200 yuan, in Taojiang 4900 yuan and in Longyou 4800 yuan. When compared with the average provincial wage23, they represent respectively 78%, 91% and 58%. To interpret this we can relate bamboo relative wage with per capita income in the context of different levels of development measured by the relative contribution of each main sector (primary, secondary and tertiary) to the county GDP. This is shown in figures 13 and 14.

In the context of the generally low wages of the forestry sector, the data seem to support the above mentioned proposition. Thus, in Taojiang, with lowest per capita income and highest contribution of the primary sector to the county GDP, the bamboo industry has expanded fastest, making a significant advance in the county’s industrialization and offering attractive salaries. In Muchuan, with a well-established bamboo industry and an intermediate level of contribution of the primary sector, the bamboo-based industrialization is close to maturity, offering reasonable salaries. In Longyou, with highest per capita income and a large proportion of the county GDP from secondary sector, bamboo industry has passed already the peak of its contribution to the industrialization process.

Two other data from table 4 can complement this analysis. The percentage of women employed in bamboo enterprises in Muchuan and Taojiang is very similar (46% and 47% respectively), and slightly less than men in the bamboo industry workforce. In Longyou women make up the majority of bamboo industry workers, with 62% of the total workforce24. This is consistent with findings in other gender-analyses of industrial surveys in China that show that women tend to be over-represented in the less attractive

23 We didn’t have average county level wages for 1996, the reference date for the enterprise questionnaire. Average provincial wages are taken from the China Statistical Yearbook 2000, that has province level information for 1999, deflated by the increase in total wages from 1996 to 1999. 24 It is interesting to note that women’s average salary compared to that of men is rather similar in the three counties, from 81% in Taojiang to 89% in Muchuan. These rates are higher than those found by Hare (1999) in her study of gender salary differences in China.

sectors (Riley 1995; Hare 1999), lending support to the view that the bamboo processing industry plays different roles depending on the stage of development in each county.

Profits are also an indication of the level of industrial maturity of a region and the level of competition between enterprises. Muchuan’s high profit of 24.4% corresponds to an expanding industry that had a high level of protectionism in the country. The removal of international trade barriers for pulp and paper in China shortly after the reference time for the questionnaire and the recent imposition of stricter pollution control measures in what is considered one of the most polluting industries in China (SEPAC 1999; Wang and Wheeler 2000) must have had a strong effect on profits. Taojiang’s 18.6% average profit falls well in the picture of a very fast expanding industry that offers a good opportunity for investment. Again, we would expect a reduction in profits as the industry expands and leads to a fierce competition between enterprises, as has happened in other sectors and places in China (Jefferson and Singh 1999). Longyou’s 8.4% falls more on line with standard industrial profits in China, indicating that its role is no longer that of a leading industry in the county.

Finally, unlike in the case of Anji, bamboo products exports are practically insignificant in Longyou and Taojiang, whereas in Muchuan the 16.5% of exports corresponds to only one large, collectively owned bamboo paper mill, and may have more to do with the protected status of the paper industry at that time than with a real international comparative advantage.

Can bamboo contribute to poverty alleviation and general development?

We have presented a number of features of bamboo raw material and processing based on studies in six counties in China plus general statistics at the country level. We conclude that within the forest sector bamboo frequently represents a superior option compared with traditional timber production. This is shared with other products like some fruit tree crops and nuts that fall under the umbrella of forests in China. From a conventional forestry point of view bamboo has a particular interest, since it is a suitable substitute for many classical timber products, in panel boards, flooring, and even paper, while it can also yield edible shoots that are increasingly appreciated.

Many studies dealing with forestry, income generation, poverty alleviation and development in China have failed to recognize this fact, focusing in traditional timber production and processing, thus overlooking at the potential of other components of forestry. We can categorically affirm that bamboo has been and still is a major component of household and county level development in the counties discussed in this paper.

Farmers in the studied counties show a pro-active attitude, expanding their bamboo plantations when conditions allow. The scale and level of investment of most bamboo industries makes vertical integration of bamboo at a county level relatively easy, thus offering farmers added opportunities.

While most farmers in our samples have expanded bamboo activities and bamboo based income, this expansion can be differentiated by income class, being higher for mid and

high income farmers. Bamboo processing and, in general, non-agricultural activities offer the best opportunities, and it is also the mid and high income group who has benefited most. Low income farmers seem to have benefited relatively less, underscoring other components of poverty that go further to having opportunities, and may have to do with ability to get engaged in them. With some reservation about its generalisability, we would propose the thought-provoking idea that bamboo in China may be good to climb the social ladder in some rural areas of China but so good that it is captured by upper-middle income farmers and not the poor.

At a county scale bamboo seems to play a differentiated role according to the general level of development. Thus, bamboo-based industries seem to be a good starting point for early industrialization, offering a number of opportunities, from markets for locally produced raw material to off-farm income and even some foreign currency. However, this role has a ceiling and our samples suggest that bamboo industries lose their dynamic, pioneering role as the county develops and enters into more advanced stages of industrialization.

This doesn’t imply that, with development, the bamboo sector can be dispensed of. On the contrary, Anji case, the richest of the counties studied, shows that, if properly established, bamboo production and its associated industry can stay there for a long time, constituting an important part of the backbone of the county’s industry, even if the leading role is taken by others.

Among some trends detected and not discussed in this paper it is worth mentioning two. First, a process of specialization with the emergence of some large family farm units who are more able to take advantage of the opportunity offered by waste land contracts, collective land contracts and other mechanisms of land re-allocation to expand their forest based activities (in the broad sense). Thus, we have found farmers having 200 mu of tea, representing ten times more than the average area of forest land, in Longyou; or a farmer with 700 mu of timber and near 200 mu of bamboo land, equivalent to 20 times the average area of forest land, in Muchuan. This can also apply to the bamboo processing industry, as in the case of a farmer in Taojiang who gets 115,000 yuan from his bamboo workshop. It is interesting to note that forest based activities seem to be more suitable for this expansion and specialization at this stage and in the counties we studied than agricultural crops, and especially than rice fields. This can lead to the intriguing question of forests as one of the spearheads25 of a process of farmer segregation and differentiation in China’s rural regions.

The second trend is an increasing county level specialization, trying to link bamboo- based primary and secondary sector activities with tertiary activities. Anji county is again a prominent case with bamboo-based tourism26. Its position in the middle of one of the richest and most dynamic regions in China has offered incentives to shift from quantity to quality, including scenery values, landscape and species diversity, and in general a new environmental concern. New policies and accompanying economic measures to support them are shifting the focus of bamboo plantations from very

25 Mainly through auctioning wastelands and other collective lands, that have forests as an important component of their alternative uses (see Hanstad and Li 1997). 26 Forest based tourism is growing very fast and has a great potential in China. Over 63 million people visited forest areas (mostly in developed regions and highly populated areas around cities) in China in 1995 (Dai et al. 1999).

intensive monocultures to more mixed systems where maintaining the appropriate soil coverage and a larger number of species is being combined with the classical production function (Ruiz Pérez et al. 2001).

This trend for a new environmental concern is very encouraging and anticipates the future of a more affluent society that can afford air conditioning, thus reducing the demand of bamboo mats as a Summer mattress, but that will also be burning bamboo paper in family rituals in a countryside cottage with a view over a ‘bamboo sea’ or other type of forest landscape.

Conclusions

The information available to understand the role of forests and forestry in development and poverty alleviation in China, and the effect of the policy reforms in this area, is limited. We have attempted to draw out some lessons from one sub-sector, fully recognizing that the lessons may not be general or widely applicable. Nevertheless, some important conclusions arise.

1. “Economic forests" play a key role in Chinese forestry – the definition of forests in China is broad and a major part of the current expansion of forest area and investment in the country. There are clear reasons for this, including: quicker returns on investment (this is related to pure financial considerations and also to wariness about policy inconsistencies); regular "pulse-type" returns (annual or more frequent harvests); slower reforms in timber sector have favoured non-timber; easier integration with agriculture (smaller units can be managed).

2. Forest-based processing is an important component of rural development - the development of a decentralized bamboo procesing industry provided an outlet (demand and incentives) for raw material producers, demand/increased prices for raw material, and new opportunities for investing labour (for wages) and capital (in the processing industry itself). This leads to a virtuous cycle of development, with increased local wealth and opportunity.

3. Policy reforms has been instrumental in encouraging these developments – policy reforms have changed the decision set and people have responded enthusiastically. Key elements of the reforms have been the increased strenght and security of (effectively) private tenure reforms for land and resource management; the liberalization of trade and investment policies, allowing for private and joint-venture development and management of processing enterprises (with related gains in overseas investment and technology transfer); liberalization of trade to allow for market mechansms for price and alloctionof resources and easeir access to export markets. This has stimulated demand and price inreases and provided the incentives for intensified raw amterial production in the bamboo sub-sector, and presumably in other forestry sub-sectors as well.

4. The importance of strong links between research and extension – China has a strong system of research and extension such that farmers/resource managers have been well equiped to take advantage of new opportunities. Having an educated peasant class is also very important. This is a policy lesson that rarely gets mentioned because everywhere else education is a missing ingredient [should we

mention something about this in the main discussion so it is a legitimate conclusion?]

5. Others?????

6. There are major information/analysis gaps – from our exhaustive literature review it is clear that this subject remains poorly researched and understood, and there is a need for more attention.

We have looked mainly at income and employment generation in the production and processing of forest products. There are also many other important issues that we have not been able to address. For example, we have not touched the important subsistence and safety net functions of forests nor the role of NTFP production from natural forests for income geeneration (a very large sub-sector in China) or how these have been affected by the policy reforms. Likewise, there have been some major negative welfare impacts of, for example, the massive unemployment created as subsidies for state forest farms have been reduced.

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