Forest harvesting restriction and forest restoration in China

Highlights

• The logging quota system in China was imposed in the late 1980s to control over harvesting.

• It was effective in halting the country’s deforestation and forest degradation early on.

• But it has failed to increase forest stock but inhibited the investment in forest management.

• Time has come for the government to consider relax the logging restriction gradually.

Abstract

The logging quota scheme was established in 1987 to control over-harvesting and promoting forest restoration in China, and it is expected to remain in place for many years to come. But the scheme has rarely been subject to careful empirical scrutiny. In this paper, we develop and estimate an empirical model to disentangle its potential effects on different dimensions of the forest condition, based on a panel dataset of 28 provinces over the period of 1989–2018. Our estimations show that while the logging quota scheme was effective in halting the country's deforestation and forest degradation from the late 1980s to the early 1990s, it has played a minimal role in promoting forest restoration and regrowth by inhibiting investment in forest management. The tremendous expansions in forest area and stock volume have been driven mostly by the sustained efforts of forest protection/conservation programs and tenure reforms. We suggest the government to phase out the scheme, especially in regions with abundant commercial forests. To start off, policymakers should carry out various piloting and experimentation working with large forestry enterprises and farms.

Introduction

As the Chinese rural land tenure reform and market liberalization got underway in the early 1980s, overlogging occurred and became prevalent across the major forest regions (Yin, 1998; Liu et al., 2017). To control the overlogging and thus its induced deforestation and forest degradation, the central government established a logging quota scheme in 1985 in place of the old planning system for forestry. Subsequently, anyone intending to cut trees with a diameter at breast height (DBH) of 5 cm or more must apply for a logging permit from the local forest agency, and any logging activity without a permit or beyond the given quota is deemed illegal and subject to punishment (Yin and Newman, 1995).

As the national authority, the State Forestry Administration (SFA) has been responsible for setting the yearly quotas for different provinces based on their resource dynamics monitored under the National Forest Inventory (NFI). Once determined, these quotas are disaggregated and allocated down to the grassroots administrative level (SFA, 1992). Later, the logging permit scheme was written into the Forest Law, predicated on the principle that annual removals must be no more than annual increments (Yin et al., 2013a; Démurger et al., 2009). When the Forest Law was newly amended in July 2020, the logging quota scheme was retained (National People's Congress, 2020). Therefore, it is safe to expect that the scheme will continue to affect timber production for years to come. So, it is relevant and interesting to examine its effectiveness and impact.

Since its inception, however, this harvesting restriction has been controversial (Zhang et al., 2007; Yin et al., 2003). A number of scholars argue that it has offset much of the improved incentives for forest management and timber production derived from the devolved forest use rights and market liberalization—core measures of the economic reforms undertaken by the government (Zhang and Lü, 2008; Luo and Zhang, 2009). This is because the logging quota scheme not only forbids forest managers from conducting their timber production in a way that maximizes their own profits, but it also creates a more uncertain but less favorable outlook for their future benefits from forestry (Yin et al., 2013a).

Indeed, several empirical studies have shown that while it might have helped stop the continued deforestation and forest degradation, the logging quota scheme has done little to enhance forest expansion. For instance, Xu et al. (2004), using panel data from 28 provinces, identified that stricter logging quotas failed to bring a recovery to the state-owned forests; instead, it led to a decline in forest growth over time. Likewise, based on a behavioral model for the state-owned enterprises (SOEs) and data from the northeast during 1980–2004, Jiang et al. (2014) found that the logging quota scheme had an insignificant effect on protecting the state forests. Coupled with province-level panel data, He et al. (2016) adopted a regression discontinuity approach to resolve the endogeneity problem embedded in the policy effect of the logging quota scheme. Their results indicate that the forest recovery in China is mainly attributable to the large afforestation and reforestation projects, rather than to the logging quota scheme itself.

The logging restriction has been subject to other criticisms as well (Yin et al., 2013b). First, it has created huge administrative burdens and costs (Tian et al., 2003). To enforce the restriction, local governments have had to hire a number of professionals to monitor the entire process of timber harvest, transportation, and distribution (He, 2016). In addition, officials from the central authorities are often dispatched to different “hot spots” to inspect and audit the ongoing implementation of the logging restriction. Second, by limiting domestic timber supply, the logging quota scheme has caused a major market distortion, so that greater importation of wood products from international sources is called for to bridge the gap between domestic timber supply and demand (Yang and Zhang, 2001; Zhang and Chen, 2021).

On the other hand, statistics from the NFIs and satellite images suggest that China's forest area and stock volume have increased substantially since the late 1990s (Piao et al., 2015; Chen et al., 2019; Wang et al., 2020). The dynamic changes in China's forest area and stock volume are shown in Fig. 1. Consequently, some policymakers and researchers have taken these changes as evidence for the success of the logging restriction (Long and Zhang, 2005; Jiang et al., 2007). However, the upward trend of forest growth has coincided not only with the imposition of the logging quota scheme but also with the execution of multiple large conservation and restoration programs and reform policies (Yin, 1998; Xu et al., 2006; Yin and Yin, 2009; Huang et al., 2010). The question thus has become: To what extent has the improved forest condition been driven by the tough harvesting regulation, the ecological restoration efforts, and/or the forest reform policies?

The purpose of our study is to address this question empirically. To that end, we will build and estimate a comprehensive causal model based on a province-level panel dataset. This paper adds to literature on timber logging quota in several ways. First, a critical part of our work is to incorporate and delineate the relevant policies and programs, so that the changes in forest condition can be properly ascribed to the underlying drivers. Second, to verify the robustness of our estimation, we solve the potential endogeneity problems and dynamic problem by employing the system Generalized Method of Moments (GMM) for our econometric estimations. Third, we employ various dependent variables representing forest restoration. Besides forest area and stock volume, we examine the impact of the logging quota on afforestation behavior and forest investment.

In the remainder of this paper, we outline our conceptual considerations in Section 2, define our empirical model in Section 3, discuss data collection and preliminary statistics of the selected variables in Section 4, and present our estimated results in Section 5. Finally, conclusions and discussion follow in Section 6.