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China Can Save Forests While Strengthening Its Economic Resilience

A recent study by Chinese and international experts argues that China’s leaders are recognizing  the importance of greening the country’s commodity value chains. As China reassesses the vulnerability and risks of its global value chains due to the COVID-19 pandemic and considers how to build back its economy with greater resilience and sustainability, the political moment is right to make this shift.

Roughly 40% of tropical forest destruction in the past decade was driven by agricultural expansion, notably the production of “soft” commodities like soy, palm oil and beef, along with industrial-scale logging for timber. This ecosystem damage has a global impact, contributing approximately 23% of global greenhouse gas emissions and posing an unprecedented threat to animal and plant species.

Driven by demand from the country’s rising middle class and limited potential for expanding domestic production, China is now the world’s largest single-country importer of soy, beef and timber, as well as the second-largest importer of palm oil (behind India). However, through collaboration with other major markets — the EU, the United States and India — China could fuel a transition to a more sustainable path for soft commodity value chains.

China's imports of soy, timber, pulp & paper, beef and palm oil in 2018

Commodities China’s share in global imports Global rank Unit
Soy 60% 1 USD
Pulp & paper 38% 1 USD
Timber* 33% 1 USD
Beef 17% 1 Tonnage
Palm oil 12% 2 USD

*Includes logs and sawnwood. Source: UN Comtrade and USDA

 

The report, a Special Policy Study conducted by the influential China Council for International Cooperation on Environment and Development (CCICED), set out to identify actions the country could take to improve the environmental and economic sustainability of soft commodities. The study makes forceful arguments that this is the right time to act, and offers specific policy recommendations:

Green Value Chains Support China’s Turn Toward an Ecological Civilization

The study emphasizes that the move to green soft commodity value chains is “entirely consistent with and supportive of China’s vision of an Ecological Civilization, at home and abroad.” President Xi Jinping’s commitment here was most recently reinforced by the pledge to go carbon-neutral by 2060. With the political stage set at the highest level, China can now take the driver’s seat in international cooperation towards more sustainable commodity value chains.

Strengthen Supply Chain Safety and Security

The COVID-19 pandemic has underscored the link between environmental and human health. Reducing deforestation associated with commodity production will help reduce the risk of zoonotic disease, avoiding unnecessary human and wildlife contact. This shift away from environmentally unsustainable production practices also helps ensure stability of supply – the long-term availability of soft commodity depends on how production resources are managed. One study found that extensive clearing of the Amazon for soy and cattle could lead to decreased rainfall within the “soy belt” of Brazil, consequently reducing soy production.

Adhere to New International Norms and Policies

Europe, the United States and other major commodity markets have enacted measures like the U.S. Lacey Act for timber, EU Timber Regulation, and policies on forest-risk commodities in EU and UK to reduce imports of illegal and unsustainable forest-risk commodities. Efforts to reduce illegal and unsustainable production of timber and agricultural commodity production that puts forests at risk are also being written into trade agreements including the EU Voluntary Partnership Agreements on timber, the US-Peru Free Trade Agreement and USMCA environmental provisions.

Some of the world’s largest agricultural companies — including Cargill, Mars, Nestlé, Olam and Wilmar — are also pursuing strategies to achieve green value chains for commodities such as soy, beef, palm oil and timber. Walmart, for example is evaluating progress on social and environmental issues within its supply chains, with pulp, paper and timber among the 100+ product categories. The chocolate manufacturer Mars has also begun to implement comprehensive policies within its supply chains to eliminate associated deforestation.

China Could Take Action Along 3 Broad Fronts:

1. Establish a National Green Value Chains Strategy

While the world continues to cope with the COVID-19 pandemic, international events in late-2021 — the 15th Conference of the Parties (COP) to the Convention on Biological Diversity (CBD) and the 26th Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC) —  will further highlight the global agenda on biodiversity and climate change. Here, China has an opportunity to clearly signal the shift to green “soft” commodities by announcing policies that link value chains with climate and biodiversity priorities.

China could take concrete steps by establishing an Inter-Ministerial Committee on Value Chain Security and Sustainability, which would be responsible for the coordination and implementation of the national green value chain strategy. It could also set up a Global Green Value Chain Institute, where expertise from governments, companies, financial institutions, research institutions and civil society organizations would help to develop more detailed commodity-specific plans and technical systems.

2. Adopt Domestic Measures to Green Soft Commodity Value Chains

China could adopt regulatory and market-based approaches to green its soft commodity value chains. The government could strengthen its management of the legality of soft commodities, building on the legality provision in its latest Forest Law and comparable standards in other major markets.

The private sector could improve due diligence and traceability systems to distinguish soft commodities that meet legality, sustainability and safety standards. China could also invest in its technology and manufacturing capacity to produce nutritious, plant-based foods that meet the growing protein demand to reduce the risks of contamination and zoonotic diseases as well as the reliance on imports.

3. Build on Existing Chinese Policies and Initiatives

The Chinese government could build on existing policies and initiatives on trade, development assistance and finance by incorporating measures to green soft commodity imports in bilateral and multilateral trade agreements. For example, China could support developing coordinated sustainability standards for soft commodities at APEC and creating tariff benefits for green soft commodity trade at WTO. China could structure its bilateral development assistance to support sustainable soft commodity production through grants, interest-free loans, concessional loans, and technical assistance to boot yields and improve traceability. China could also align its green value chain strategy with existing mechanisms on green finance and the Belt and Road Initiative.

These policy recommendations, put forward in the CCICED Special Policy Study, have been submitted to the State Council to inform China’s green development strategy in its 14th Five Year Plan. Early action will position China as a leader in the movement towards sustainable soft commodity supply chains and offer big opportunities for both the domestic and international agenda.

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