On March 27th, the 2008 Consulting & Training Conference on Policies Concerning Sino-Russia Forest Resource Exploitation and Timber Processing Investment, organized by China National Forestry Industry Association and China Wood International, Inc., was held at the Beijing International Bamboo and Rattan Tower. At the conference, many experts and government leaders from China and Russia discussed Sino-Russia forest cooperation policies and investment environment, and agreed that Sino-Russia cooperation faced a new situation requiring the upgrading and further development of Sino-Russian cooperation.

Companies encouraged to invest in Russia
Developing cooperation between China and Russia, given the rich forest resource in Russia, will help ease the wood raw material shortage in China and strengthen Chinese forest companies. It was recognized that it is important for the development of the forest industry in both China and Russia for Chinese forest companies to be encouraged to invest in Russia. Also, the Chinese and Russian governments need to adopt more preferential policies and measures to support the investment of Chinese companies in Russia.

It is reported that the Chinese government encouraged many companies, including wood logging, wood processing, and the paper and pulp industry to invest in other countries. A financial insurance supporting system was established by the State Development and Reform Commission (SDRC) as well as several financial institutions, including the Development Bank of China, China Import and Export Bank and China Export & Credit Insurance Corporation. With the encouragement of the Chinese government, this system will offer financial support for key investment projects abroad. 

From the conference, it was clear that Sino-Russian forest cooperation had made significant progress, and that new investment in Russia would transform the Russian forest products industry. Chinese companies investing in forest development in Russia would lead to more vertical integration in response to changes in policies, both in China and Russia. These investments were beginning the shift in the business model from logging operations alone, to include increased timber processing. Further, the transformation of the operating model from establishing single factory sites to the construction of integrated wood processing facilities is also to be expected.

Russia is engaged in promoting the investment environment
On January 1st, a new Russian Forest Code came into effect. The implementation of the new Russian Forest Code further extended the opportunities for cooperation between China and Russia. The Russian government began to reduce log exports and to strengthen the development of the wood processing industry in Russia. Those measures will offer good opportunities for the Chinese companies with sophisticated integrated processing systems. At the same time, the new code offered further legal guarantees to the investors, and provided further assurances for international cooperation.

Great enthusiasm for investment in Russia was showed by Chinese companies
Based on the result of survey carried out by China Wood International. Inc, of the 41 of companies investigated, about 95% of them were likely to invest in Russia; 61% of them had an investment plan for Russia; about 72% of the investment plan was scheduled for 2008, with investments ranging from US$1million to US$1.5billion. In all the investment projects, about 32% were below US$5 million, and 24% ranged from US$10 million to US$60 million. The largest investment in Russia was US$1.57 billion.

It is obvious that Chinese forest industry companies are very enthusiastic about investing in Russia. Especially with the implementation of the new Forest Code and the rise of the log export tariff, more and more Chinese companies will be investing in Russia, and the average size of these investments will likely continue to rise.

CWI offers more channels to boost Sino-Russia cooperation
With the support of both the State Forestry Administration and the China National Forestry Industry Association, China Wood International. Inc organized a series of activities to boost Sino-Russia forest industry cooperation, including investment studies and market investigations in Russia; introducing Chinese wood machinery and equipment; and compiling a Guide of Chinese Wood Machinery and Equipment Exporters.

The Sino-Russia Investment and Trade Negotiation Conference planned for next September will provide a forum and exhibition to help Chinese companies to obtain in-depth understanding of investment condition in Russia, and promote further cooperation between China and Russia.