China move to boost timber firms

Related Topics: | Wood Industry | News Flash |

China move to boost timber firms

Extracted from The Star Publications, November 19, 1999

By Jagdev Singh Sidhu

KUALA LUMPUR: Malaysian timber companies will clearly benefit from China's admission into the World Trade Organisation (WTO).

This follows the lowering of import duties on forestry products to China to between 5% and 7.5%, said Merrill Lynch in a report.

Companies that would benefit the most, according to the report, are Jaya Tiasa Bhd, Lingui Development Bhd and Subur Tiasa Bhd. Jaya Tiasa, said Merrill Lynch, had the highest exposure to the China plywood business which accounts for 39% of the company's revenue.

This is followed by Lingui (25%) and a relatively small exposure for Subur Tiasa.

Merrill Lynch said Malaysian companies would benefit from the lowering of import duties by China because:

* China's current import duty on plywood is 15%; and

* China is the second largest importer of tropical or hardwood tropical timber in Asia.

"China's rising demand for logs and plywood is expected to continue owing to the country's economic development and declining domestic log production," said Merrill Lynch.

Another reason for a potential windfall for Malaysian companies is that Malaysia is the largest supplier of tropical timber products to China, accounting for 80% of tropical logs and 60% of veneers and plywood imports.

China and the US reached an agreement with the US on trade issues on Nov 15 and this paved the way for China to join the WTO.

Merrill Lynch expects the liberalisation of tariffs for forestry products into China to be staggered and believes that it would take place over three to five years.

Merrill Lynch said China's entry into the WTO has a mixed impact on Indonesian paper companies.

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