FOREST TRANSITION

Deforestation and Forest Transition: Theory and Evidence in China

by Yaoqi Zhang

Abstract: A general theoretical framework on deforestation and forest transition is presented fol- lowed by empirical evidence from China. Relative scarcities of food, timber and environmental goods resulting from both population and economic growth are believed to be the most funda- mental causes of forest change. A relative scarcity of population – a factor of production as well – is considered to drive population change and re-allocation. The time required from deforestation to forest transition may be prolonged by the time lag in forest regeneration, and by the transaction costs, i.e. the costs in transferring, defining and protecting property rights of land and forests. The institutional issue is specially addressed throughout this article because the “exclusion cost”, i.e. the ex post cost of transaction in property rights of land and forests, is relatively large compared with other aspects of property protection. Consequently, active forest management is not econom- ically justified on a large part of land which otherwise should be under active management. This article concludes with a preliminary forecast of the future trend in China’s forests and policy implications on future forest development.

Keywords: Deforestation; forest transition; reforestation; transaction costs; economic reform; land use; population; China.

1 Introduction an increasing population for agricultural land and for timber are widely recognized While the forests in the developed coun- as the most important causes of deforesta- tries have ceased to shrink in area and have tion. However, the scarcity of timber, and even begun to expand – a reversal which industrialization are generally viewed as 41 in this article is called forest transition – accounting for forest transition (Rudel the developing countries are still in the de- 1998). Both conclusions seem to conflict forestation stage. The growing demands of each other but are likely to be correct. The

WORLD FORESTS FROM DEFORESTATION TO TRANSITION? M. Palo and H. Vanhanen (eds.), World Forests from Deforestation to Transition? © 2000 Kluwer Academic Publishers, Dordrecht. problem is that we do not identify the ori- economic environment. Land quality is a gins of forests and analyze them separately broad concept here, referring not only to based on the origins. Forests can be either soil, steepness, incidence of rocks, sources natural endowment, or social products, but of water and exposure to wind and sun, but they have different responses to socio-eco- also to distance and types of roads to mar- nomic environments. The net change in ket and habitation, etc. The socio-economic forests is determined by the total effects. environment refers to the output and input Joining in the current debate and con- prices, and institutions. The input and out-

FOREST TRANSITION cerns regarding deforestation in developing put prices can be measured on-site and in a countries, an attempt is made to formulate market. Prices may vary greatly when trans- an integrated theoretical framework of the portation costs are significant. deforestation and forest transition and to provide empirical evidence from China. 2.1 Land Use for Agriculture versus The forecasts and policy suggestions to be presented are argued to be relevant not only Forestry to China but also to other countries. The land rent for forestry or any other land use is determined by the output prices, the input costs and the land quality. For sim- 2 Framework of Deforesta- plicity, agriculture is considered as the only tion and Forest Transition other land use option. If we use (pa ,wa) and (pf ,wf) to represent the set of output price The theoretical framework of forest land and input cost by agriculture and forestry change, which is extended from the model respectively, the land rent for agriculture by von Thunen (1875), is illustrated by Fig- and forestry with land quality q will be

ure 1. Land is used for the option which pa(pa,wa,q) and pf(pf ,wf ,q). If pa(pa,wa,q)

creates the highest land rent in a competi- >pf(pf ,w,q), the land will be allocated to ag- tive land market. Therefore, the land use ricultural use. Otherwise, the land will be option and forest management method are used for forestry. For instance, the land to determined by the land quality and socio- the left of A in Figure 1 should be allocat-

42

Figure 1: Land use for agriculture and forestry by land quality ed to agricultural use, and the land to the It must be emphasized that land conver- right of A should be used for forestry. On sion is not costless and the cost is often the boundary, the rents for agriculture and sunk. In reality, land use conversion forestry are equal. becomes much less flexible when the cost Point A in Figure 1 shifts when on-site associated with conversion is considered, output or input prices for agriculture and while land modification, referring to forestry and land quality change. For sim- change within one category, e.g. among dif- plification, we just consider the changes in ferent agricultural crops, is quite flexible. input and output prices and do not consid- Land use conversion from forestry to agri- er land quality change that may derive from culture is more likely to happen when trees road expansion, soil degradation, etc. are grown to (or quite close to) an econom- Graphically, if prices for agricultural goods ically mature age. The capital in silvicul- rise (or input price decreases), the curve of ture is sunk and cannot be recovered (even the agricultural rent will shift to the right, partly) if the trees are too young. Land con- and some of the forestry land will be de- version from forestry to agriculture requires voted to agriculture. Alternatively, if the significant investment. It may take years to prices of forest products rise (or its input cut down the trees, remove stumps and price decreases), some of agricultural land stones, erect buildings and fences, to will be devoted to forestry. develop large-scale irrigation and drainage Mathematically, to understand the effects system, and to expand the initial clearings of the change in forest product prices on into productive farms. Most of such invest- the shift of the forest-agriculture frontier, ment is also sunk. If the expected outcome the total derivative of the equation (the prices and costs) does not differ great- pa(pa , wa , q*) – pf(pf , wf , q*) = 0 (q* refers ly from the reality, the land is likely to re- to the boundary land where rent created main in agricultural use. from forestry and agriculture is equal) with Forest land conversion to agriculture and respective to q* and pf is: (¶pa/¶q*) × dq* other uses might be significant during the

– (¶pf /¶q*) × dq* – (¶pf /¶pf) ×dpf = 0. early stage of economic development, but Therefore, (dq*/dpf) = (¶pf /¶pf) / [(¶pa/¶q*) it would not be critical with respect to the – (¶pf /¶q*)]. As long as the higher quality total land area available for forestry. The land is used for agriculture, [(¶pa/¶q*) – more critical problems are: (1) the stagnant (¶pf /¶q*)] will be positive, so (dq*/dpf) is timber price, poor credit markets, risk aver- also positive since (¶pf /¶pf) is positive. The sion, and poorly developed institutions do new equilibrium point q* will therefore not justify forest investment for the logged- move to better land quality q** when pric- over land; (2) forestry may be unprofitable es of forest products rise, thus some of the on a quite large area abandoned by other higher quality land currently used for agri- land uses due to soil degradation and other culture will be devoted to forestry (q** socio-economic reasons. That is why de- > q*). By the same procedure, it is possi- forestation is much faster than the ble to derive the land use shift between expansion of agricultural land in most de- forestry and agriculture in response to the veloping countries. changes of agricultural products and the inputs in forestry and agriculture as 2.2 Management of Forest Land 43

Forestry land = Af (pa ,wa , pf ,wf ) [1] FAO (1995a) defined forest land under – + + – active management as “forest and other

WORLD FORESTS FROM DEFORESTATION TO TRANSITION? woody land that is managed according to a purposes: if forest does not exist, trees will professionally prepared plan or is otherwise be planted; if the forest is already existing, under a recognized form of management logging will not be undertaken, e.g. natu- applied regularly over a long period (five ral reserves and public parks. However, a years or more)”. Land will be under active more common solution could not be 7 “Š ,

forest management if 0< pf(pf ,wf ,q) and i.e. joint management of timber produc-

pf(pf ,wf ,q) > pa(pa ,wa ,q). In Figure 1, only tion and environmental services could be the land to the left of B is under active for- more common in active forest manage-

FOREST TRANSITION est management. ment regimes. Clear cutting is gradually The amount of investment and the length regulated, while its alternative, selective of rotation, the decision variables in forest cutting, is more accepted due to apprecia- management, are functions of the land qual- tion of environmental value. It means the ity, output and input prices. To calculate the new rota- tion always start from a certain optimal investment and rotation, the Faust- age of trees. mann model can be applied 7 Non-Active Forest Management PD[ × UW Ã pI T   7( U{  J W(YT H GW [2] The unexploitable forests, which are locat- U7 U7 S 4T 4 7(SZT H ±Z T (}[ ±H ] ed to the right of D in Figure 1, means that the stumpage price is zero, p(Q, q) = 0. Of course, land value for forest management

where, pf (q) is annual land rent created by is also zero. Since the forests already exist, forestry for land quality class q; p(Q, q) is their value is not related to soil productiv- on-site stumpage price, which is a function ity, but is closely related to the status of the of the status of forest (Q), e.g. biomass den- forests (Q), depicting species, the growing sity and tree species and land quality such stock of the forests, the distance and the as steepness and distance from the market accessibility to the market, and harvesting under given market price; w is on-site unit and transport technology. cost of silviculture, which is a function of Except for the unexploitable forests, all the market costs (both materials and labor) forestry land is assumed to be under active and the distance from the labor supply, the management based on traditional produc- likely labor market and materials supply, r tion economics which consider no is the capital cost or simply interest rate; T transaction costs. Because forest regenera- and E are length of rotation and on-site units tion can be achieved naturally, without any of silviculture efforts; g is annual accumu- or very minor on-site silviculture efforts for lative in situ value of forest at age t. y most logged-over land ¶Q(T, E; q)/¶T>0 represents factors such as population, in- when E»0, the p(Q, q) shall become posi- come and economic structure, which affect tive when Q reaches a certain level, e.g. the demand for in situ forest products (Park the original level after a certain years. Since et al. 1998). it is theoretically possible for the forest to The optimal solution of rotation T and recover to its original biomass density, pos- silviculture efforts E can be obtained from itive rent is possible, and active manage- 44 the first order maximizing conditions. An ment has value. extreme case is that the optimal solution is However, much land world-wide is 7“Š. This means that the forest manage- today not under active management. This ment is undertaken for only environmental is particularly so in developing countries. Note: If E = 0, the early growth function of closed access is the same as open access before time t.

Figure 2: Forest biomass density growth under open access and closed access

The land not under active management is between B and D in Figure 1. Because the often interpreted by economists to be the exclusion cost is the most important result of open access. On the other hand, reason that makes forest management un- while the change from open access to justified, the shifts of Point B and C in closed access can create Pareto efficiency, Figure 1 are highly sensitive to general so- it is difficult to understand why open ac- cio-economic, political and institutional cess is so common in developing countries. conditions. Figure 2 shows the different The problem lies in that traditional produc- biomass growth under open and closed ac- tion economics does not consider transac- cess. tion costs. The transaction costs associated with land ownership change includes ex The Cost of Exercising Ownership ante and ex post elements (Mattews 1986). It is not costless to move from open access Here the ex ante costs of transaction are to closed access. not discussed, as these are associated with Increasing timber prices or decreasing defining and transforming property rights. extraction costs – due to road construction The ex post costs of transaction are more or improved logging or transportation tech- important regarding trees and forested land, nology – will make more remote forests but these are often ignored by academic increasingly exploitable, shifting the for- studies. The common situation is that the est frontier (Point D in Figure 1) and proba- land is given ownership, even legal rights bly some secondary forests (Point C) to the either by the state, the community, private right. Frontier forests on a large scale are lo- persons or organization, but the owners fail cated in remote and less populated regions. to exercise rights when the gains from im- Since most of these forests are owned by plementing their exclusion rights are the state or are in open access, any change deemed insufficient. Thus the land is left in the frontier will greatly depend on pub- in public domain, in open or quasi-open lic policies in road expansion, population access. settlement and logging regulations. The costs of ownership not only include 45 Between these two extremes, there is the cost of obtaining titled or recognized substantial forest or forestry land that is rights, but also the cost of protecting exist- under non-active management, the area ing rights. If exercising existing rights is

WORLD FORESTS FROM DEFORESTATION TO TRANSITION? too costly, the ownership becomes nomi- can be in association with property right nal: the legal rights are retained but not the protection. According to officially docu- economic rights (for more about the differ- mented statistics from the Ministry of For- ence between legal rights and economic estry (1992), there were one million peo- rights see Barzel 1997). Therefore, an an- ple employed in preventing illegal access swer to open access could be the high ex to forests. Of these more than one third ante and ex post costs associated with trans- were full-time jobs in the early 1990s. actions where the land is originally not There were another 200 000 officials whose

FOREST TRANSITION owned, or with ex post “exclusion costs” duties were associated with designing and associated with transaction where the land implementing regulations, and assisting dis- is already owned. In other words, the actu- puted settlements concerning forest prop- al land value is the profit calculated by the erty rights. These figures demonstrate the traditional production economics minus the considerable magnitude of the costs of pro- transaction costs of obtaining and protect- tection. Forest management has to consid- ing the land and forests. er these costs. Even so, illegal logging is When the exclusion cost is added to the still rampant in China due to the character- production function, Equation [2] is trans- istics of the forests such as easy access, no ferred as follows clear maturity, and traditional conventions, norms and laws as well as wide-spread pov- 7 p T à à PD[ U{Ã × J WÃ( YÃT ÃHUWÃGW erty. Ià  [3] 7(  Illegal extraction in forests, particularly ÃS 4ÃT Ã4 7Ã(ÃSÃZÃT HU7ñÃZ T Ã(Ãà in common forests (not to be confused with 7 open access forest), is often looked upon ± × mà WÃ( FÃT ÃHUWÃGWà }Ã[ ±ÃHU7 ]Ãà as being less criminal than in agriculture  because, historically, trees are “wilder” than agricultural crops. Trees are often viewed where m is the annual protection costs for to be in the public domain, at least to some forests at age t, which is a function of the extent. On the other hand, if stealing a tree status of forests, the institutions (F ), land worth one-month’s wage is without much identity, and perhaps other socio-econom- risk of being caught and with no serious ic variables. Now it is much easier to penalty if caught, illegal logging will re- understand why quite a large land area has main difficult to prevent. It is not surprising, zero land rent, and active forest manage- therefore that Poore et al. (1989) conclude ment is not justified. In this case, the that non-active forest management is so optimal solution is E = 0, and T is the time common and sustainable forest manage- when the biomass density rises to justify ment is so rare in the tropics. extraction. The m is also a decision varia- ble. The owners must make a trade-off The Cost of Exercising Exchange between a possibility of losing their eco- nomic rights and investment in protecting As discussed above, the costs of exercis- their rights. For simplicity, let us unrealis- ing ownership can be interpreted as part of tically keep it as cost of protecting the full transaction costs. Now we turn to another 46 economic rights with no possibility of loss. closely related transaction cost: the cost of To emphasize the importance of exclu- exercising exchange through the market. sion costs, let us use China as an example This was interpreted by Coase (1937) as to show how big the magnitude of the costs a more fundamental reason for the emer- gence of firms. He defined the transaction The Role of Population Change cost as “the cost of using price mecha- nisms”, “the cost of carrying out a transac- In the short term, it is assumed that popu- tion by means of an exchange on the open lation settlement remains static. Point A in market” or simply “marketing costs”. Figure 1 could be very sensitive to the Coase (1960) further explained transaction change of the relative market price of tim- costs as “to discover who it is that one wish- ber and other goods that are largely based es to deal with, to inform people that one on land. During the early stage of econom- wishes to deal on what terms, to conduct ic development of a country with substan- negotiations leading up to a bargain, to tial natural forest growing stock, the elas- draw up contract, to undertake the inspec- ticity of timber price to population growth tion and so on”. is likely to be less than the elasticity of food The Faustmann model clearly does not price to population growth. Consequently, include the marketing cost of the output – agricultural expansion is likely, and Point neither the cost of organizing the produc- A in Figure 1 usually shifts to the right. tion, nor the “purchasing” cost of input The above is based on static human set- factors, such as labor and capital. This may tlement, but populations are always seeking not be important if such costs are relative- for cheap resources, including land and ly small compared with the value in forest resources. Population growth chang- exchange. However, these costs are not es the land-labor ratio. Consequently, small due to the characteristics of forest changes in the relative prices of land and products (or stumpage) and the status of labor lead to an increase in the value of in- market instruments in the developing coun- ferior land. With respect to forest resources, tries. Even in an advanced economy, the the decline in the forest-labor ratio increas- cost of capital, the simplest product, is usu- es the relative value of forests and decreases ally more than 5%, the difference between the value of labor. Thus increasingly infe- interest rates of deposit in and loan from a rior forest becomes valuable and labor bank. The long persistence of self-suffi- spreads out to seek its higher value. In oth- ciency economies in developing countries er words, when population migration is less is largely consequent upon the cost of costly than transporting the resources, pop- exchange through the market. ulation will move to locations close to the resources. The population movement can 2.3 Causes for Shifts in Land Use occur either as a slow spread of popula- and Management tion, or as big new settlement projects which are rapidly established. This proc- Point A in Figure 1 shall shift when on-site ess will continue as long as any virgin land output or input prices for agriculture and and frontier forests remain. Historically, forestry – or land quality – change. The on- population migration plays a much more site price change is often difficult to ob- important role in forest change than the serve. More generally, the land use change local growth of population. may be considered to have resulted from The general path on forest change in the the changes associated with population, context of population change is, therefore, infrastructure, technology, or institutions. as follows: First, as the population grows 47 These factors are not addressed separately, and the economy develops, the speed with but discussed in the framework of popula- which A in Figure 1 shifts to the right for tion and institutional changes. agricultural expansion, and the speed with

WORLD FORESTS FROM DEFORESTATION TO TRANSITION? which D shifts to the right for timber ex- 1955; Kuznets 1966, 1973; Stigler 1966; traction from frontier forest is faster than Alchian and Demstz 1972; North and Tho- the movement of B to the right. The area mas 1973; Dahlman 1979; Cheung 1983; between B and D is largely bareland, open North 1981, 1990; Williamson 1975, 1985; forest and shrubs, and non-actively man- Barzel 1997). Using similar arguments that aged forest land. Whenever a large forest apply to more general economic perform- area or other land resources are not inhab- ance, it is hardly controversial that changing ited and used, population migrations into institutions may have great influence on

FOREST TRANSITION these areas are likely to occur. Therefore, land use. It is still argued as to what kind deforestation could occur for a quite long of causality relationship exists between period of time. When Point D approaches economic performance, institutions and E, pushing D to the right is difficult because technology. It seems plausible that they are of increasing marginal costs. The speed interactive. with which B moves to the right increases In the long-term, institutional evolution as price increases. Finally, forest expansion may be greatly affected by the process of becomes dominant. At this time, large pop- socio-economic development. Along with ulation movements are mostly character- the increase of scarcity, the gains from ized by urbanization. Forest cover would transformation from open access to closed cease to decrease, remain stable, or perhaps access will gradually exceed the costs and even begin to increase. hence have an effect on institutional ar- rangements. Open access may change into The Role of Institutions closed access. In addition, the scarcity might justify transfers of ownership, for The impacts of institutions on economic example state forests might be transferred performance have been acknowledged to community ownership. These again may since John Stuart Mill, Adam Smith and be transferred into private ownership. That Karl Marx. Recently, institutions have is why we may find much less community received great attention by institutional owned land in the developed than in the economics that include economics of trans- developing countries. However, increasing action costs and the economics of property scarcity of environmental goods might rights (see e.g. Coase 1937, 1960; Lewis again justify some transactions from pri- vate forest land into public domain. The general pattern of land property regimes is illustrated in Figure 3. Institutional changes, either in property right institutions or market (non-market) institutions, may not always evolve effi- ciently and instantly. Institutional rigidity and inertia may persist for a considerable period of time. Inertia may prevent institu- tional adaptations to the environmental changes as well as causing institutions to 48 be inefficient. Information and knowledge concerning alternative institutions are al- Figure 3: The rent gradient and property ways limited, the judgment and decision regime (Bromley 1991) making in choosing therefore vary from society to society. In addition, institutional tion of the Empire of China, published in arrangements, particularly in the short term, Paris in 1735 and in English in London in are to a large extent the product of public 1738, could be the earliest work for west- choice under the balance of power among erners. Perkins (1969) explored agricultural different interest groups. Significant differ- land development from 1368 to 1968. Shaw ences are observable in the institutions of (1914) also could also be among the earli- countries with similar environments. est commentators on China’s forests and Following the insights of transaction cost timber supply. Murphey (1983) focused on economics, the characteristics (as immobil- deforestation in the 19th and the first half ity, long-waited maturity, difficulty in of the 20th century. Menzies (1994) de- delineating property rights) of relatively scribed the historical pattern of land use large magnitude of the transaction costs and deforestation in China by referencing compared to production costs in forest ancient literature. management, make forestry more sensitive If the current territory of China is divid- to institutional arrangements. In develop- ed by a diagonal line from the northeast to ing countries agriculture, which is more the southwest, the original vegetation cov- technology oriented than silviculture, has er can be classified into three categories: reached levels which are not too far behind Forest land dominated the area with an the level in developed countries. In forest- extensive and dense forest cover of over ry, there is much more poor management 70–90% to the right of the diagonal; grass- in developing than developed countries. land and forest with 20–30% forest cover Even silvicultural technology is in general dominated in the transition zone, along the still primitive in developing countries com- diagonal line; and as the third category pared with developed ones. The difference desert and bareland dominated with less in the performance of forest management than 5% scattered forest to the left of the in developing countries compared with de- diagonal. The types of forests varied from veloped ones is largely due to institutional boreal forest in the northeast, temperate differences. deciduous broadleaf in the north, and mixed deciduous and evergreen broadleaf forest in the south, with tropical forests in the 3 History of southernmost region of China. Thus, about Deforestation Process half of the land was originally covered by forest. Liu and Wang (1989) estimated that China has a good record of information in 2700 BC there were six provinces with regarding forest and land use changes. Very more than 90% forest cover and 14 prov- detailed records have been kept on vegeta- inces with more than 50%. tion, flora, fauna, climate and agriculture development for more than 3000 years. 3.1 Loess Plateau and However, until the 1950s, there was little Guangzhong Region material in the English language, except for some reports contributed by professional Significant deforestation began at least as plant hunters from Europe and America in early as 3000 BC in the Loess Plateau Area, the late 19th and early 20th centuries, and the place of the origin of the Chinese civi- 49 by a few Chinese scholars who were edu- lization. A temporal process of deforesta- cated abroad. According to Murphey tion started from the heartland of the (1983), Jean Baptiste du Halde’s descrip- Guangzhong region, currently Gansu and

WORLD FORESTS FROM DEFORESTATION TO TRANSITION? Shaanxi Provinces, at the junction of the It is logical to assume that the causes of Wei and Yellow Huang Rivers. According deforestation and degradation are to be to archeological records, the population found in agricultural expansions that be- was dense in this area around 3000 BC. The gan around 3000 BC and reached their original status of the vegetation was and is climax around 1000 BC, following logging a subject of much debate between advo- as the population grew and spread. cates of the forested vegetation view (Teng 1947; Wen and He 1979; Wang and Sheng 3.2 North China FOREST TRANSITION 1994) and the non-woody vegetation view (Handel-Mazetti 1931). Based on informa- As the environment deteriorated, the Loess tion contained in the Book of Odes (Shi Plateau region shrank and the population Jing) and the Classic of Mountains and with its economic and cultural centers Rivers (Shan Hai Jing), among other sourc- moved eastward along the Yellow River to es, it is more widely accepted in China that the current Shanxi, Henan and Shandong the forest was dominant before human in- provinces. Rich forests covered the Tai tervention. Because this site is located in Mountains region, consisting of several an ecological transition zone from moist to high mountains: Tai, Lu, Yi, Men, Daze and semi-arid and arid climate, it would more Kunlun among others. According to ancient likely vary between forest-dominated and literature, the vegetation was dominated by grass-dominated vegetation, rather than arid natural forest and grassland 3200–3000 deserts. Menzies (1994) considers that the years ago (Wang and Sheng 1994). This image of the pristine landscape of north- view is supported by many notations on the ern China was neither of dense forest nor activities of large wild animals, including of barren steppe, but rather of a mosaic of tiger, elephant, rhinoceros and others re- vegetation: riparian forest followed the corded in the Meng Zi-Teng Wen Gong, Shi courses of rivers, with rather sparse decid- Ji-Zhou Ben Ji, Lu Shi Chun Qiu and other uous woodland and brush on the mountains classical literature. and denser deciduous forest on the foothills. According to the Meng Zi-Gao Zi, land It is widely recognized that the natural reclamation had begun at the time of the environment of the Loess Plateau Area was Zhou Dynasty (1100–256 BC) during greatly damaged around 1000–500 BC. which significant areas of natural forest There are interesting records which con- were logged and transported to nearby are- cern the Wei and Yellow Rivers in this as, which were the most civilized and pop- respect. According to Wei Feng in Shi Jin, ulated in China at that time. The population the rivers nearly 3000 years ago were very density was still low, however, and people clear, indicating no soil erosion. The rivers mainly resided in the lowlands. By 500 BC, may still have been occasionally clear 2500 the forest had been logged extensively, but years ago. Thereafter the rivers were always much forest still remained in the middle of yellow. The Yellow River, probably named mountains due to difficult accessibility. The during the period 320–311 BC, indicates forests, in general, were seriously damaged the acute soil erosion and high silt loads at during the period 500–0 BC. In the follow- that time. It should be noted that climate ing years, logging and agricultural expan- 50 change has been suggested as the cause of sion steadily progressed to the mountainous this deforestation. However, the fragile range and spread southward and northward. environment and climate change only made The agents of deforestation were mainly the recovery of vegetation more difficult. logging, followed by pastoral husbandry and steadily increasing reclamation towards Province in 1127. A significant area of for- the marginal area. est was converted into agricultural land The population continued to move north- during the following decades. Because of ward and the capital was relocated in its mountainous landscape and favorable Beijing during the Yuan Dynasty (1271– climate, southern China still had an abun- 1368) in 1297. Rich forest grew on the Yan dance of virgin and secondary forests du- Mountains. This site was located in a so- ring the Song and the Ming Dynasties and cio-economic and political transition zone, the early part of the Qing Dynasty. The most varying from developed, permanent agri- significant loss of forest occurred during cultural area in the south (North China the late Qing Dynasty, particularly during Plains) inhabited by the Han Chinese, to the war of Taiping Rebellion (1851–64). the pastoral agricultural area in the north, The population was not limited to the inhabited by minorities. This location, mainland, a large number of the people according to some research, was still dom- immigrated across the Qiongzhou strait to inated by forests and grass land and mainly Hainan Island during the Song and Yuan inhabited by nomads since only marginal Dynasties. From the Han Dynasty (206 BC– reclamation was occasionally carried out 220 AD) to the Tan Dynasty (618–907), this by Han prior to the Yuan Dynasty. In the island was populated along the southeast beginning of the Yuan Dynasty, this area coast mostly by the minority Li. Shifting was listed as a hunting preserve of the em- cultivation was in fact firstly widely car- perors and was well protected. The growing ried out along the southeastern seashore population, together with an increasingly where the Li first settled. They then retreat- significant economy, promoted the demand ed steadily to the central mountains after for food, fuelwood and timber. The whole the Song Dynasty. At that time, the shifting process of deforestation was fulfilled dur- cultivation was gradually replaced by semi- ing the Yuan Dynasty, Ming Dynasty permanent cultivation, followed by perma- (1368–1644) and Qing Dynasty (1616– nent cultivation in the northwest and 1911). The driving forces were intensive southeast. With the introduction of new hunting, repeated logging for timber and tools, the areas along the seashore settled fuelwood, followed by pastoral husbandry by the Han, who had come there from the and cultivation. Fuelwood collecti- on is mainland, steadily came under permanent assumed to be a critical factor in deforest- cultivation. Before the Song and Ming Dy- ation, since fuelwood collection, regardless nasties, large areas of virgin forests still of the size of the trees, may be repeated existed since the forest was mainly used as too frequently and intensively. In the be- the source of non-wood forest products: ginning of this century, no large area of berry collecting, hunting and limited har- forests remained in this region. vesting for household use. Around the 16th century, timber extraction for industry and 3.3 South and Southeast China direct supply to be market began. At the beginning of the 20th century Hainan was During the late Song Dynasty (960–1279), threatened by a lack of timber (Pen 1922). southern China was experiencing a rapid Due to the difficult accessibility to the population growth and migration from the center of Hainan Island, there was still large 51 north when northern China was occupied areas of tropical forest in the middle of the by the Mongolians. The capital was trans- mountains at the early part of the 20th cen- ferred to Hangzhou in the current Zhejiang tury. The most significant timber extraction

WORLD FORESTS FROM DEFORESTATION TO TRANSITION? from the rain forest took place during the large territory. Only marginal natural for- 20th century, particularly from the 1950s est was logged by the end of the 19th cen- to the 1980s. Most of the tropical crops, tury. Russian railway construction in the particularly the rubber tree were introduced late 19th century and the Japanese takeo- around 1900, and have promoted signifi- ver in northeast China in the early 20th cen- cant agricultural expansion, especially tury promoted significant deforestation in during the last 50 years. the Changbai Mountains. It is estimated that about 100 mill. m³ of timber had been trans-

FOREST TRANSITION 3.4 Southwest and Northeast China ported out and 6 mill. ha of forests was logged, accounting for approximately half The southwest parts of Sichun and Yunnan of the total area (Liu and Sun 1985). provinces still had a lot of natural forests The remaining forests in the Changbai remaining at the beginning of the 20th cen- Mountains region were further logged af- tury. The most significant deforestation ter 1949 when the People’s Republic of occurred during the last 50 years. Current- China was founded. Over 30 forest bureaus ly, only Tibet and some parts of Yunnan, were set up after 1949 with the intention to for instance Xishunbanan, still have any log the forests. About 10 mill. m3 of indus- remains of virgin forests. trial logs flowed out of the region and huge Northeast China had large areas of vir- amounts of timber were annually consumed gin forest at the latter part of the 19th cen- locally (Ministry of Forestry 1987). From tury. The Changbai Mountains region was the 1950s to the 1980s, the logged area almost pristine land before the Qing Dy- amounted to 1.5 mill. ha. It is estimated that nasty, and it was still well preserved by the by the end of the 20th century there will be emporers as a traditional Manchurian base no accessible mature natural forest left. and imperial hunting ground in the early Large areas of forest land were converted Qing Dynasty. Han (Chinese) settlements into agricultural use to serve the growing began to spread northeastward beyond the population, which has more than doubled Great Wall on large scale only after 1870 during the last 50 years. Soil erosion is be- when the Qing authority weakened and the coming very serious. For example, in the population pressure in North China in- seven counties located east of Liaoning creased. The earliest Han immigrants, how- Province, more than 0.2 mill. ha of culti- ever, first arrived on the Liaodong Plains, vated land have had to be abandoned due south of Liaoning Province, which is the to soil erosion. southwest to the Changbai Mountains. The Heilongjiang Province, located to the population was still small relative to the northeast of the Changbai mountains, has

Table 1: Forest resources decline in Heilongjiang Province

 (Heilongjiang General Bureau of Forestry 1987) a shorter history of deforestation (see Ta- rean pine in the total from 13% to 6.4% ble 1). One of the most important forest (Ministry of Forestry 1987). In addition, regions is the Xiaoxinganling range that is agricultural clearances claimed much of the bordered by the Heilongjiang River in the forest land. For example, in Heihe alone, north, by the Songhuajiang River in the the area under agriculture increased by south, the Daxinganling range in the north- 35 000 ha from 1962 to 1980. west and a large plain in the southwest. Logging was started during the Japanese 3.5 General Pattern of Deforestation occupation, but only along the railway from Harbin to Jiamushi. From 1950 to the mid- To summarize, China’s deforestation start- 1980s, a total of 24 state-owned logging ed in the Loess Plateau Area, moving east- enterprises were set up, and about 0.3 bill. ward along the Yellow River to the current m3 of logs were produced, approximately Shanxi, Henan and Shandong Provinces, 1/7 of China’s total industrial timber pro- then spread northward to the current He- duction during that period. bei and Beijing regions, and finally moved Most of the state-owned logging enter- beyond the Great Wall to northeast China. prises are now short of mature forest Meanwhile, the population moved south- resources in Heilongjiang Province. From ward to southern China, even across the sea 1950 to 1978 in the Yichun prefecture to Hainan Island. In general, the plains and alone, in the heart of Xiaoxinanliang, the locations along major rivers were usually growing stock decreased from 4146 mill. occupied and cultivated first, then pro- m3 to 2414 mill. m3, the share of conifer- gressed to low hilly regions and finally to ous forest in total inventory decreased from mountainous ranges. Table 2, using six re- 68.5 % to 51%, and the proportion of Ko- gions as an example illustrates the popula-

Table 2: Deforestation in six selected sites à /RHVVÃ3ODWHDXà 7DLÃÃ

WORLD FORESTS FROM DEFORESTATION TO TRANSITION? tion movement, deforestation, and agents Dynasties (2100 BC–1100 BC). During the and underlying causes. early Han Dynasty (206 BC–220 AD), the Over these thousands of years, there has Chinese began a systematic land reclama- been a cycle of deforestation, mild recov- tion and irrigation schemes. ery, and more severe deforestation (Liao During the 20th century, the area of ag- 1987). In general, intensive logging in the ricultural land has not significantly increa- frontier forests and better management of sed, but the loss of forests continues. A large the secondary forests coexisted at the be- part of the loss is not because the land is

FOREST TRANSITION ginning of each dynasty because relatively constantly occupied by other uses, but rath- greater population growth and the stronger er because it is abandoned and not con- economy demanded more agricultural land verted to active forest management. This and timber. Better management was also applies to the logged-over forest land. secured by a more stable political regime and a strong government. Rampant forest destruction, due to wars, conflicts and weak 4 From Deforestation to government and institutions, was frequently Forest Transition found at the end of each dynasty. The demand for agricultural land and Data concerning China’s forest resources timber following human settlement are was published in the China Yearbook in clearly the primary causes of forest loss. 1943 and on at least ten other occasions However, the rate of agricultural land ex- before the first national forest inventory pansion is much lower than that of the (1973–1976). All the data, basically rely- population, and deforestation is much faster ing on the data of 1943, stated that the for- than the agricultural land expansion (see est cover rate ranged from 5% to 8%; the Figure 4). As early as the Tang and Yao era 8% is more often cited. These figures, how- (about 2500 BC), shifting cultivation was ever, are misleading. The mistakes result- extensively carried out and continued for ed from both incorrect estimates and one thousand years during the Xia and Shan varying definitions, such as definition of forest, the territory of China, etc. Unfortu- nately, many public officials and academ- ics, both domestic and international, have used this data as a point of reference (Chu 1988). Thus, this 1943 forest area became the most widely recognized benchmark when the People’s Republic of China was founded in 1949. When the first national inventory was published, the forest cover rate was given as 12.7%. It seemed that forest resources had significantly increased over the 8% fig- ure given for 1949. In fact, it is reasonable to believe that the 1949 forest area propor- 54 tion was about 15% assuming the same Figure 4: Changes in population and cultivated definition of forests. Be that as it may, the land area in China, 1400-1995 (Perkins 1969; Wang process of deforestation continued during 1992; Ministry of Agriculture 1950–1995) the first 30 years of the People’s Republic Table 3: Land use conversion between forestry and other land uses in China, 1980–1986 and 1986–1992 à ,QWRÃIRUHVWÃODQGà )URPÃIRUHVWÃODQGà 1HWÃIRUHVWHGÃDUHDÃFKDQJHà PLOOÃKD à PLOOÃKD à PLOOÃKD à  à  à   ²  à à ÃÃÃÃÃà à Ã²à ²à Ã²à ²à Ã²à ²à 2SHQÃIRUHVWà à à à à ²à à %XVKÃDQGÃVKUXEà à à à à à à 1HZÃSODQWHGÃIRUHVWà à à à à à à %DUHODQGà à à à à à à 2WKHUÃODQGÃXVHà à à à à à à 7RWDOà à à à à à à (Ministry of Forestry 1989; 1995) Note1: Other land uses might not necessarily mean non-forested land. In China’s statistical system, the definition of forestry land and forested land refer to the potential use and the sectoral ministry who manages the land. For instance, some forested land owned by agricultural farms is likely to be listed as agricultural land. Therefore, the real conversion between forested land and other land uses is much smaller that the figures show. of China. Logging in northeast and south- Table 3 illustrates in more detail the on- west China may have had social and eco- site land conversion among different cate- nomic benefits, but the radical deforestation gories. The estimates are based on 200 000 during the Great-Leap-Forward in 1958 and repeated on-site observations. In general, the Cultural Revolution from 1966–1976 was the shifts of land use from one category to a complete abuse of natural resources. another have become less significant. The However, since the 1970s, China seems increase in forested area was more likely to have embarked on a road to forest tran- deriving from open forest, shrubs and bare- sition. The analysis here is mainly based land. Therefore the increase of the forest on the four national forest inventories con- land area does not necessary mean a con- ducted during 1973–1976, 1977–1981, version of other productive land use cate- 1984–1988 and 1989–1993. FAO (1995b) assumes that the reliability class is 1 for the state estimates and 2 for the change as- sessment (range from best = 1 to worst =

3). The present study divides China’s terri- tory into five regions: Northwest, North,

Northeast, South-Southeast, and Southwest (see Map 1). The land use in these five re- gions is illustrated in Figure 5. From the figures, some general conclusions can be drawn: the turn from contracting to expand- ing forest area in the Northwest of China occurred during the late 1970s; in the North and South-Southeast the turn occurred dur- 55 ing the early 1980s; in the Northeast and Southwest the transition started during the late 1980s and early 1990s. Map 1: China’s regions and provinces

WORLD FORESTS FROM DEFORESTATION TO TRANSITION? gories into forest land. The conflicts be- ests exploitable, while the scarcity of land tween land use are often overestimated. and forest resources compared with popu- lation causes populations to move. How- Scarcity of timber and Environmental ever, as was indicated earlier, the relative Goods scarcity of timber also justifies active for- est management. Hyde et al. (1993) and As discussed in the theoretical section, a Hyde and Seve (1996) had an intensive dis- scarcity of timber makes more remote for- cussion on the response to timber scarcity FOREST TRANSITION

Northwest China Northeast China

South-Southeast China North China

Southwest China

Note: The provinces for each region refer to Map 1. The bareland only includes the technically forestable land, so the sum of land is possibly not equal to total land area; the build-up area includes urban and industrial areas, roads, etc; some discrepancies are due to statistical problems, particularly in Southwest, where the boundary of Tibet was not quite clear. 56 Figure 5: Major land uses in China by regions from 1970s to 1990s (Ministry of Forestry 1978, 1982, 1988, 1995; China’s Statistical Bureau 1975–1996) in terms of combating deforestation and argued that deforestation has an economic limit that precedes its physical limit. Fig- ure 6 shows the scarcity of forest resources as measured by the deflated timber price. Prior to the late 1970s, timber price was tightly controlled by government. Price might not be good as a measure of scarcity of timber, as the price did not show a large increase. However, timber was listed as one of the top scarce products. Since then, tim- ber prices have risen throughout the 1980s. Since the mid-1990s, timber prices have Note: The price is deflated by the retail price index. somewhat decreased because of a growing timber supply from the plantation forests, Figure 6: Timber procurement price index in China, 1951–1995 (China’s Statistical Bureau 1989 timber imports and some changes in the and 1996) economic structure of the country. Figure 7 indicates that the timber pro- duction in regions with poor forests, such as in Northwest and North China, increased earlier than in the well forested areas, such as in Northeast China. The transition may in fact come out as an increase in timber production through a change from a regime of non-actively managed forests to a regime of actively managed forests. It should particularly be emphasized that scarcity includes environmental goods that generally do not yet have a market price. If we view the economy as being open, tim- ber can be imported from other regions or other countries, so scarcity – if we use price Figure 7: Industrial timber production in China as the measurement – can hardly go beyond by regions, 1974–1996 a certain level. But most environmental goods are supplied on-site and cannot be imported. Local supply is therefore often to massive plantations of fast-growing trees necessary. An increasing share of the af- and imports. However, the demand for en- forestation in China is environment vironmental goods is also growing fast due oriented as it is in other countries and re- to population growth and economic devel- gions. As an example forest management opment. In China more than 16 mill. ha of in Singapore and Hong Kong or other high- protection forests, accounting for 14% of ly populated regions is clearly not for the total forested area, is aimed at environ- timber production, but for the supply of en- mental services. The protection forests are 57 vironmental goods. mainly located in the three northern areas In China, the timber scarcity since the (North, Northwest, Northeast; see Table 4). 1990s has been eased to some extent due Ten of the eleven recently implemented

WORLD FORESTS FROM DEFORESTATION TO TRANSITION? Table 4: Main environment oriented forests in China 5HJLRQÃ 7RWDOÃODQGÃDUHDÃ 3HUFHQWDJHÃRIÃ 7RWDOÃIRUHVWHGÃ 3URWHFWLRQÃIRUHVWÃ PLOOÃKD Ã ODQGÃDUHDÃRIÃ&KLQDÃ DUHDÃ PLOOÃKD Ã DUHDÃ PLOOÃKD Ã ÃÃÃÃÃ 7KUHH1RUWKÃ5HJLRQÃ Ã ÈÃ Ã Ã ÃÃÃÃÃ 8SSHUÃDQGÃPLGGOHUHDFKÃRIÃ Ã ÈÃ Ã Ã

FOREST TRANSITION ÃÃÃÃÃ 7KHÃSODLQVÃUHJLRQÃ Ã ÈÃ Ã Ã ÃÃÃÃÃ 7RWDOÃÃ Ã ÈÃ Ã Ã  (Ministry of Forestry 1989; 1995)

massive afforestation programs were initi- deny it as necessary reason for the forest ated specially to combat environmental transition. It must be realized that scarcity problems (Zhang et al. 1999). In addition, is the motivation for ownership and mar- about 9 mill. ha of forestry land are pre- ket exchange. China experienced shortag- served as natural reserves, for either es of timber supply in the 19th century environmental or ecotourism purposes. (Shaw 1914; Pen 1922; Murphey 1983). Rudel (1998) has argued that a scarcity Without considering either the transaction of timber might not induce reforestation be- costs or risks, China’s forest transition – at cause of potential substitutes for wood and least at a regional level – should have oc- the time lag of reforestation. Substitutes for curred in the late 19th century: in fact, for- wood really ease wood scarcity, may pre- est management in China has over 1000 vent wood price increase and can delay the years of history. Unfortunately, between the reforestation. However, looking for wood late 19th and the mid-20th centuries, Chi- substitutes is a process actually induced by na suffered from continuous wars. Con- the scarcity timber. The time lag of regen- fronted with such unrest the environment eration is really considerable, and with for long-term investment, such as forest sustainable forest management a consider- mana- gement, was hostile. able time between two rotations is required. Within the People’s Republic of China, Forest change is thus sometimes misunder- great efforts have been made concerning stood, partly because of the short-term afforestation. China was widely recognized activities overshadow the long-term per- as having the world’s largest forest planta- spectives. tion area (Westoby 1975; FAO 1978). The continued political struggles did mean that Institutional Transition afforestation measures, more specifically institutions governing the measures, proved Palo (1994) among others has argued that to be ineffective. Logging on the natural the forest transition is often not realized forests still outweighed the efforts in affor- because of market failures and inappropri- estation. The radical deforestation during 58 ate property rights, political unrest and the Great-Leap-Forward in 1958 and the missing information in developing coun- Cultural Revolution from 1966–1976 was tries. This argument only explains that scar- completely a result of institutional prob- city is not a sufficient reason, but does not lems. The inappropriate assessment of a 8% for such private ownership had also been of forest cover in 1949 and 12.7% in 1976, developed. Those institutions have been the as well as rampant false reports on the af- basis for socio-economic development. forestation achievement, overshadowed the Unfortunately, the land reform from 1949 deteriorating status of China’s forests. Only to 1952 and the follow-up socialist trans- when the data from second national forest formation, completely destroyed these in- inventory (1977–1981) showed a decline stitutions. In the short term, the land reform of the forest resources, was the serious state did have some positive effects on rural de- of China’s forests given attention by the velopment and equal income distribution, general public. A growing demand for but the long-term negative impact is sig- wood, resulting from both population nificant and far-reaching. Building institu- growth and economic development, had to tions is much more difficult than destroying rely on huge imports of forest products them. North (1991) pointed out that insti- during the 1980s. The state-owned logging tutional change is a complicated process. enterprises also faced a serious economic Although formal rules may change over- crisis. Deforestation resulted in an increase night as the results of political or judicial in environmental damage and the frequen- decisions, informal constrains embodied in cy of natural disasters. customs, traditions, and codes of conduct These signals and concepts of scarcity are much more impervious to deliberate called for a revision of the general forest policies. policies. To increase both the forest cover Recent reforms are trying to rebuild the and the growing stock became a top prior- institutions and management organizations ity. The strategy was changed from “min- with respect to (1) clarification of forestry ing” the forests – moving Point D and C to land property rights through forestry land right in Figure 1, to a silviculture-based owners’ re-titlement. While there is still no forestry – moving Point B to the right. Large recognition of private land ownership scale funding and efforts have been allo- rights, at least private land-use rights and cated to silvicultural investments. Nume- forest property rights are recognized; (2) rous massive programs for industrial tim- the role of law in forest management is ber supply, soil and water conservation, being addressed, and significant forces are coastal natural disaster prevention, biodi- being provided to protect economic rights versity preservation, etc. have been imple- in forests, as well as helping to provide mented (Zhang et al. 1999). solutions where disputes occur. The Forest Law was firstly enacted in 1985 and amend- Institution Building in Forestry ed in 1998; (3) a free timber trade is gradually being permitted which recogniz- Institutions have clearly played an impor- es the economic rights to forest products; tant role in both deforestation and the for- (4) the de-collectivization and reorganiza- est transition. China’s land tenure had tion of collective forestry land is progres- developed already at a much earlier time sing through the Household Responsibili- to the level of today’s capitalistic countries ty System and the Share-holding System in the beginning of the past century. Almost and other types of joint or co-operative all agricultural land and a large part of the management; also (5) de-centralization of 59 forest land had been owned by landlords the state-owned forestry land is occurring and some rich peasants for centuries. Some through dissolution of the management institutions and land market mechanisms authority and budget regime.

WORLD FORESTS FROM DEFORESTATION TO TRANSITION? Institution building has proved difficult ly located in the northwest and southwest and time consuming, not only in term of China, is to some extent technically un- the institutions themselves, but also in forestable. Of course, “unforestable” is a terms of the credibility of the government. relative concept in the long-term. Some of Even after two decades of considerable ef- the most favorable “unforestable” terrain forts by various governments promising has been and will be forested, while some that forests owned either privately or col- forested land and potentially forestable lectively will be legally protected by laws, land has degraded into unforestable due to

FOREST TRANSITION the farmers are still in doubt whether the the loss of reversibility resulting from heavy government will always maintain such a and repeated damage, for instance over- policy. This again demonstrates how diffi- harvesting and over-grazing. Significant cult it is to rebuild institutions once they shifts in land use do not seem likely, in spite have been destroyed. However, these re- of the great efforts such as silvicultural forms have already helped the forest technology developments, which have been transition to some degree (Ruiz-Peres et al. made to overcome some of the biological 1996; Yin and Newman 1997; Song et al. limits in the northwest region. Meanwhile, 1998), and will play a more important role some marginal land continues to degrade in the future. to become unforestable. A minor net posi- tive change depends on the economic status, technological development, policy 5 Prospects for the Future and public awareness of the environment in the future. Forecasts of China’s forest and land use trends have been made by the Chinese So- ciety of Forestry (1987) and Gu (1988) Forestry versus Competing Land Uses among others. Errors in the forecasts are The boundary of forestry land and non-for- becoming obvious. The problems lie in the estry land is Point A in Figure 1. The causes fact that they are based either on past trends, of the boundary change has been discussed government planning or political opinions. above. Economically, agricultural use is Even though some of the models are very becoming less competitive: agricultural sophisticated and seem to consider com- products in general are more expensive than prehensive variables, the most important imports. China’s entrance to the World mechanisms driving the forest transition Trade Organization will further lower the and the response to scarcity are still not general price level of agricultural goods. taken into account. Alternatively, let us The long history of agriculture has left lit- examine a very simple way to predict the tle potentially arable land in existing future of forest land change. forested land, so the possible shift from for- ested land to agricultural land could be Forestable versus Unforestable Land comparatively minor. On the general issue of food security, Before the conversion between different China will invest in its agricultural infra- land uses is analyzed, technically unforesta- structure, which is intended to increase pro- ble land must be excluded. Unforestable ductivity and improve some of the degraded 60 land refers to the biological limits of tree agricultural land. In the short term, imports growth because of factors such as temper- of agricultural products are expected to in- ature, soil, altitude and water. Currently, crease. The policy for food self-sufficien- about one third of the land in China, most- cy, at least at the regional level, is gradually losing support due to its inefficiency. There- net change from forestry land to other cat- fore, increased government subsides for egories, are gradually becoming insignifi- agriculture can be neither justified nor ex- cant and in the future may possibly be from pected. Since the social price of the out- other land uses to forestry. puts from forest management is much higher than the timber market price, it is Forests in the Future? likely that subsides to forestry, government direct investments and loans, will be in- The changes within forestry land refers to creased. Agroforestry and urban forest de- the area located to the right of A in Figure velopment are other alternatives for 1. Future forest changes will mostly be overcoming land limitations and combin- within this category. Firstly, consider Point ing forestry and agriculture. D or C in Figure 1. Given the current pop- Point A in the Figure 1 is not very ap- ulation density and distribution, Point D has propriate because it only indicates the shift almost approached E. That means China between forestry and agriculture. Theoret- has few frontier forests and little virgin ically, a growing population and industria- land. The remaining virgin forests, togeth- lization will occupy more agricultural land, er with some secondary natural forests, putting more pressure on agricultural land have been protected to fulfill environmen- and pushing agricultural frontier A to the tal functions. The extensive floods of the right, utilizing directly forestry land. How- late 1990s across China led to a re-appraisal ever, current population movements and of the natural forests, resulting in the full industrialization are characterized by road implementation of the bans on logging in improvements, expansion and urbanization. natural forests. Marginal timber extraction In other words, new large settlement sites, from natural forests might be unavoidable even the establishment of small villages, but only selective cutting is allowed. In this as in the 1950s and 1960s, is less possible sense, these forests are neither frontier for- and not encouraged by the government. ests nor non-actively managed forests, but Forest management may therefore benefit managed forests and their value is reflect- more than agriculture in reduced costs re- ed in their environmental functions. sulting from road expansion and improve- Therefore, neither a small rise in timber ments. price nor a decrease in extraction cost To sum up, the total net conversion from should be a threat to them. In fact, the in- forestry land to the competing land uses, crease in environmental value caused by including agricultural, residential and in- the growing demand and decreasing sup- dustrial land, may no longer be significant ply of environmental services will help their (see Table 3 and Figure 5). As a nation, Chi- protection, management and expansion. na has “matured”. As far as land use is con- Increasing large-scale protection forests cerned, there will never again be radical and nature reserves are good examples of and rapid changes in major land uses such this process. as occurred during history. The change Secondly, consider Point B in Figure 1. within each category is likely to be greater Forest land under active management – than the change between the categories. mostly plantation forests – are likely to Changes in major uses of land will tend to expand, assuming that timber prices will 61 be localized since no large population mi- continue to rise. This assumption may be gration is possible except from rural areas valid since less timber will come from nat- to urban areas. The conversions, at least the ural forests, and more subsidies or tax cuts

WORLD FORESTS FROM DEFORESTATION TO TRANSITION? can be expected. More importantly, improv- · In the medium term (20 years, up to ing the socio-economic conditions and 2020), on the assumption that institu- institutions, including laws and property tions will experience some significant rights security, will reduce the protection progress, the distorted timber supply costs and the risks that investors must bear. price will be adjusted and more non- The development of institutions has already market values of the forest will be played a role in the forest transition and considered. It is appropriate to use the will continue to be important in the sus- international prices of agricultural goods

FOREST TRANSITION tainable expansion of forests. and wood products as shadow prices. Finally, consider the area from B to C in Under this assumption, around 22% of Figure 1, that is to say, forestry land under the land, which is equal to the current the non-active management. This area may forest cover 15% plus 7% through af- be the most important section for future foresting 50% of the area between B and change, as about half of forestry land, or C, could be covered by forest. 15% of the total territory of China, is in · In the long term (50 years, up to 2050), this category (see the categories of bare- it can be assumed that institutions will land, open forest and shrubs in Figure 5). reach the same level as in the current As already discussed, it is the transaction developed world, and the non-market costs rather than the traditional production value of water and soil conservation, costs which make active forest management carbon sequestration, biodiversity pres- uneconomic. The role of institutions, which ervation and other environmental is important in reducing transaction costs, functions will be considered in govern- will be even more important for its transi- ment decision-making. It can therefore tion into active management. be expected that about 28% of the land, To forecast the future changes in the for- over 200 mill. ha, which is equal to the ests of China, attention should again be current 15% plus 13% through afforest- given to the land between B and C in Fig- ing 90% of the area between B and C, ure 1, denoting bareland, open forest and will probably be under active manage- shrubs. The area of this land category ac- ment. counts for 15% of the total land area of China. Focusing on this land and consider- ing the future development of the economy, 6 Concluding Policy institutions and markets, some simple pre- dictions can be made as follows: Implications · In the short term (5 years, up to 2005), Deforestation is unavoidable in any coun- on the assumption that the current dis- try with rich virgin forests. The growing torted timber price with heavy tax and demand for agricultural land and timber by fees continues, institutions regarding either a local population, or population land tenure and macroeconomic policy growth through resettlement, are important will improve steadily but will not change reasons for deforestation. However, for a significantly. It is expected that 17% of country like the current China, where few the land area of China, equal to the cur- frontier forests are left, timber will become 62 rent forest cover of 15% plus 2% through more scarce and worth managing. There- afforesting 5–15% of the land between fore, a forest transition will be likely to B and C, is likely to be covered by for- occur. However, there is insufficient justi- est in 2005. fication for active forest management to be derived from traditional production eco- grams. This may not be the most effective nomics. The transaction costs of land approach. Without the institutions that cre- property rights consist of the costs of ex ate cheap exclusion costs, closed access is ante and ex post of transactions. All po- unfeasible. Without closed access, any in- tential land rent will dissipate whenever the vestment in silviculture is wasted money. land is in open access. However, the po- If forest management is profitable, private tential gains from open access to closed investment will be induced. The priority of access will also dissipate if the transaction government should be to invest in institu- is too costly. The transaction costs are im- tion building that would promote the portant factors for the transition from definition, transference and protection of non-active to active forest management. property rights. Therefore, institutions are critical, since transaction costs greatly depends on them. Acknowledgments Based on the previous discussion, some policy implications regarding China’s fu- Thanks are extended to Jari Kuuluvainen ture forest development can be outlined: of the University of Helsinki, Jussi Uusi- · The first priority is to emphasize the de- vuori of the Finnish Forest Research velopment of institutions to significantly Institute, William Hyde of the Virginia reduce property right protection costs for Polytechnic Institute and State University forest management and to provide more (USA), Daowei Zhang of the Auburn Uni- security and confidence for farmers con- versity (USA) and Chunjiang Liu of the cerning the continuity of the property University of Helsinki for their comments. rights. This will accelerate the transition The Department of Forest Economics of the into active management in the area be- University of Helsinki, the United Nations tween Points B and C in Figure 1, which University/World Institute of Development today accounts for 50% of total forestry Economics Research (UNU/WIDER) and land. the International Development Research Centre/Economy and Environment Program · The second priority is to reduce taxes for Southeast Asia (IDRC/EEPSEA) provid- on timber production and adjust the tax- ed considerable support. All possible errors ation in order to increase the current are the responsibility of the author. forest management intensity by using price incentives. This would effect the References area between A and B and would encour- age the shift of Point B to the right. Alchian, A.A. and Demstz, H. 1972. Produc- Lump sum tax could be a good alterna- tion, Information Costs, and Economic tive. Organization. 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