Last year turned out to be quite difficult for the Chinese economy since the COVID-19 epidemic began in 2020. The main economic hub of the country and one of the largest cities, Shanghai, was closed for at least two months. There are many high-tech enterprises and factories located in Shanghai, and Shanghai is also a logistics center for international trade. Thus, the blocking of Shanghai affected not only the city's economy, but also the development of the economy of all other cities in the country.

In 2022, China's GDP growth was only 3%. In 2020, the GDP growth rate was 8.3%. During the epidemic, people were reluctant to buy new things and preferred to save money. Thus, real estate sales in 2022 decreased by 24.3%.

Despite the decline in the volume of real estate sold, the China Timber and Wood Products Distribution Association cannot say that the market of finishing materials and furniture was bad, because over the past 6 years, more than 1.6 billion square meters were commissioned annually.

Real estate is closely related to the consumption of wood. The decline in sales in the real estate market has led to a decrease in wood consumption. This can be estimated by sales of roundwood and lumber in the country, as well as by imports of wood, which decreased by 22% last year.

The final data for 2022 on the domestic turnover of wood is still unknown, the Association simply feels that total consumption decreased last year, and softwood accounts for the main decrease in imports. Last year, softwood imports decreased by 31 million cubic meters (38%), and softwood lumber imports by 23 million cubic meters (16%).

At the same time, the import of hardwoods remains stable. Imports of hardwood lumber amounted to 14 million cubic meters, i.e. increased by 9%, and the volume of imported hardwood logs amounted to 13 million cubic meters, i.e. decreased by 9%.

For the first time, the volume of lumber imports exceeded the import of roundwood. If you look at the supplier countries, the main volumes of supplies of both roundwood and softwood lumber come from several countries. The main suppliers of softwood logs are New Zealand and Germany, and lumber comes mainly from Russia.

If you look at the list of countries-suppliers of hardwood, it is very diverse. The geography of the importing countries for round forests can be called balanced - the leaders are Papua New Guinea, Russia and the Solomon Islands, Thailand is the main supplier of hardwood lumber.

What other changes have occurred in the import of wood?

Last year, the hubs through which the distribution of forest products took place changed. Products mainly come from Europe to China by land transport. Some inland ports have become new hubs for China-Europe trains, such as Chengdu, Chongqing, Zhengzhou, Wuhan and Nangkan.

Thanks to rail delivery from Europe to China, much attention is paid to both multimodal and intermodal transportation. This leads to the emergence of new distribution centers, while the importance of old hubs is declining (such as Suifenhe and Manzhouli, which were traditional border points). In the new cities – distribution centers, wood receives primary processing, which was not the case in traditional transport hubs, where there were no such processors. This leads to a decrease in the attractiveness of transportation through traditional routes and companies are leaving cities such as Sunfeihe and Manjouli, which are in dire need of transformation.

Another change is that China's largest softwood import port has moved from Taicang to Rizhao. In the next three years, the Taicang government plans to stop phytosanitary treatment of wood, which has led to many traders and producers leaving Taicang and moving to Zhichjao, as well as to some inland areas along the rivers, such as Changshu and Zhejiang.

What's going on now?

The central and regional government in China is focused on the economic development of the country. Within the framework of this development, the China Timber and Wood Products Distribution Association accepts all possible activities for the development of the timber industry. The Association works in close cooperation with the Chinese authorities to organize this kind of activity, the purpose of which would be to attract investment in large high-tech projects.

The central government of China plans to get 5% GDP growth, the IMF forecast is 5.2%. In the development of industry, the emphasis is on high-tech, environmental friendliness and artificial intelligence. After three years of the pandemic, the greatest attention is being paid to the stability and security of supply chains.

What about real estate?

As mentioned earlier, the timber industry is closely linked to the real estate market. The Association does not predict an explosive growth of the real estate market, because the central government has already set a limit on speculative transactions of home owners.

Thus, the growth of demand in the market of new buildings has almost stopped. The situation does not inspire optimism, the demand for softwood lumber is frozen.

It is impossible to say exactly what will happen to the real estate market. On the one hand, according to a survey conducted by the Association, Chinese industry is in relatively good condition. There has been a delayed demand for finishing materials since last year, for example, from young families who are preparing new housing for themselves.

But, compared to previous years, fewer orders are noted at the factories. It remains to be hoped that the orders will still reach the factories. With more certainty, it will be possible to judge the situation on the market in March – April 2023.