A Study Of Economic Benefit Evaluation Of Poplar Industrial Plantations In China Jilin Forest Industry Group

The sustainable development of forest resources cannot be realized without considering economic benefits. At present, world’s forestry and forest resources from different countries and regions are becoming increasingly more dependent from each other under the framework of global economy. As a country with the most planted forests but in shortage of timber resources, China’s forest evaluation has to be consistent with economic system of world’s forestry, helpful for further exploring the issues in commercial forest development under classification-based forest management scheme in China. To develop target-oriented, intensively managed, and market-guided industrial forest plantations is a necessary approach for lowering the pressure from the self-sufficient goal of timber supply. In particular, China is facing strategic regulation in forestry and the new forest policy will reduce and even completely ban logging from natural forests across the country. It is important for forest enterprises in China to maximizing timber production and economic income from active management of industrial forest plantations. Thus their economic crisis will be eliminated, their domestic and international competition capabilities will be enhanced, and their forest resources will be optimized. Poplar plantations are characterized with fast growth and can help produce high economic gains with high financial investment in northeast China. Such a model of commercial forest management has a good potential in other forestry regions in China.Financial returns of forest plantations are indeed an important concern around the world. The net present value (NPV), equivalent annual income (EAI), and internal rate of return (IRR) were often used as indicators for assessing economic returns of poplar plantations. Forest economic benefits are affected differently by biological, policy design, as well as economic environment factors, and it is important for forestland owners and policy makers to know which factor is more dominant than another. Few researches have analyzed these correlation factors with empirical data in plantation financial analysis. And there is nothing in existence that laid out systematic research on the indicators of plantations’ economic benefits in the stated-owned forestry area of China.This paper demonstrates the potential investment returns and analyzes factors that directly influence the returns of fast-growing poplar plantations in a state owned-forest enterprise, China Jilin Forest Industry Group (CJFIG), in northeastern China. An approach of a combination of theoretical research and empirical research had been used in this study. This paper demonstrates a model of industrial plantation investment returns, rooted in traditional forest economics, classification of management, forest growth and yield models, neo-classical economic framework, financial analysis, compound interest and financial maturity. We quantified values of relevant forest management activities (site preparation, planting and replanting, stand tending, pruning, fertilization) as fixed expenditures in the construction of industrial poplar plantations, simulated forest growth with the Logistic Model and examined practically possible ranges of general inflation rate (f=2.0%、f=4.0%、f=6.0%), rate of forest fund (RFF=10.0%, RFF=18.0%, RFF=26.0%)), and interest rate(r=4.0%, r=6.0%, r=8.0%)in China Jilin Forest Industry Group (CJFIG), a typical state owned-forest enterprise in northeastern China. We then computed net present values (NPV), equivalent annual income (EAI) and internal rate of return (IRR) by using the minimum, medium, and maximum values of the each determinant with Mann-Whitney U Test. We used the capital budgeting analyses of NPV、IRR and EAI, to determine the optimal rotation ages and future investment returns in developing poplar industrial plantations by using existing natural commercial forestland.The results showed that growing poplar plantations could be five times more profitable than managing the existing natural forests in CJFIG. The optimal rotation length we obtained was15years in this case, and the optimal rotation lengths could be shortened to the tenth year with low discount rate and rate of forest fund. The Mann-Whitney U test suggested that the significance of contributions from each variable to economic benefit was not even. The consequences of NPV and EAI have negative correlation with interest rate and rate of forest fund, and have positive correlation with inflation rate. Interest rate, ranging make the most significant difference in NPV and EAI. Inflation rate makes no significant different results in NPV, but a major increase in inflation rate will make significant different results in NPV. Results showed improving inflation rate at a minor level changes has no significant effects on EAI, but a major increase in rate of forest fund will make significant different results in EAI. The development of industrial forest plantations requires rational administrative arrangement. In other words, it is necessary for China Jilin Forest Industrial Group to not only study how to increase the economic benefits of industrial forest plantations, but also ensure active supports from sylviculture technology, planning management, policy instruments, and funding support.