BUSINESSWEEK ONLINE : MAY 8, 2000 ISSUE
INTERNATIONAL -- ASIAN COVER STORY Where the Future Is Made of Wood (int'l edition) Spring rice-planting season is days away, and the lumberyard at Plantation Timber Products is buried under piles of eucalyptus, pine, and fir logs. It's harvest time for the newly converted tree farmers of Leshan, in China's southwestern Sichuan province. They have unloaded thousands of logs on PTP's mill, eager to make a killing before going back to their traditional--and less profitable--occupation as rice growers. These are the kind of people the central government in Beijing is determined to enlist in its ambitious campaign to enrich the nation's laggardly western region. Even as China struggles to pull off this daunting challenge, PTP's state-of-the-art, $65 million fiberboard factory represents a small but shining success story. ''WIN-WIN.'' The joint venture teams up Sichuan's forest bureau with Singapore philanthropist Laurence Moh and American Daniel Spitzer, PTP's energetic chief executive officer. Backed by such U.S. investors as Chase Capital Partners plus more than $35 million of project financing and equity from the World Bank's International Finance Corp., the factory produces 115,000 cubic meters a year of medium-density fiberboard for the China market. ''It's a win-win situation,'' says Tang Limin, who runs Sichuan's foreign-investment bureau. ''The foreign enterprise makes a profit, and the economy develops.'' Besides helping to fill local government coffers--three years after opening, the plant is already Leshan's biggest taxpayer--PTP is providing new opportunities for some 650,000 subsistence farmers in this hardscrabble region 140 kilometers from the provincial capital, Chengdu. One beneficiary is Xu Decai, 46, who used to farm one-third of an acre outside the village of Heiqiao. After scraping along growing rice, rapeseed, and vegetables, 18 months ago Xu rented 1.7 acres of land from the local government and got into tree farming. Once his fast-growth pines and eucalyptus mature, Xu will sell them to PTP. He expects to pocket a profit of $2,000--a princely sum in a place where the per capita annual income is just $222. With the money, Xu plans to buy a motorcycle, as well as clothes for his parents, wife, and 18-year-old daughter. He would also like to build an addition to the extended family's traditional brick house. ''I used to be just a regular farmer,'' says Xu. ''But in the future, I'll definitely be making a big profit.'' PTP's reliance on farmed trees fits in nicely with Beijing's stated policy of moving toward greener industries. For the past half-century, polluting chemical and machinery factories and mining characterized the region's economic development. Unchecked logging in Sichuan and other western provinces has widely been blamed for severe soil erosion, not to mention the disastrous flooding of the past few years. Moreover, PTP has played a small role in reducing China's dependence on tropical hardwood harvested from Southeast Asia's ravaged forests. Not that setting up shop has been without setbacks. PTP has had difficulty attracting top-drawer managers and technicians to work in rural Leshan. Local officials occasionally have been suspicious of the foreign-backed factory's motives, accusing it of hijacking local resources. But nothing has been harder than ensuring a reliable supply of wood from the country's hundreds of thousands of small farmers. The problem became particularly severe in 1998, when Beijing banned logging in virgin forests. As hundreds of state-run mills scrambled to procure wood, PTP's supply shrank drastically. In a few months, production fell by 50%, says PTP CEO Spitzer. To get contracts honored, he says, ''we had to knock on a lot of officials' doors. But they were very responsive.'' PTP says it is in for the long haul. Last year, the company opened another $60 million facility in adjoining Hubei province. It is considering acquiring three state-owned wood mills later this year in the coastal provinces. And while some local apparatchiks remain wary of the new player in town, for people like farmer Xu, PTP is the best thing to come along in a very long time. ''My life is much better than my father's,'' he says. ''And the next generation's will be even better.'' That is precisely what Beijing is betting on. By Dexter Roberts in Leshan _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS China's Wealth Gap (int'l edition) ASIAN COVER IMAGE: China's Wealth Gap MAP: China's Poorest Provinces TABLE: Why China Must Develop the West Where the Future Is Made of Wood (int'l edition) INTERACT E-Mail to Business Week Online

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