home | e-mail us | ask professional expertise

Biodiversity protection, sustainable crop production, and fair trade in China and Asia's Mekong Region
tropical rain forest flowers, exotic rare plants and herbs, products for gardening, horticulture, landscaping, health, hobby, and on wholesale

shop in our store and contribute to biodiversity protection and fair trade

go to:

Species list | Exotic plants shop | Tropical crops | Books | Puer tea | Health & aroma | Herbal medicine | Heat treatment

invest | contract grow with us | become a partner | wholesale

1. Understanding Current World Trends in Natural Rubber Production

1. falling natural rubber prices
2. stagnating world demand for natural rubber even as world rubber stocks increases
3. increasing dependence on synthetic rubber

In the early 1900s up to around 1912, profits accrued from rubber production allowed investors to recover their capital investments within 2-3 years of production. From the onset of the First World War until the middle of the 20^th century, although rubber prices were substantially lower, it was still commercially profitable to engage in its production.

A decline in the late 1970s in world demand for rubber was further compounded by a world recession and a stagnant world commodity market, however it was corrected by strong recovery in the mid-80s. This prompted all NR producing countries to ratify an agreement reached in 1981 during the first International Natural Rubber Agreement (INRA 1) which made provisions for stabilising the world price of rubber by maintaining a large international buffer stock which accumulated during low prices and were disbursed when prices were high.

Average Spot Crude Prices (Smoked Sheets) in New York (cents/pound)

Thailand, Indonesia and Malaysia are the biggest producers of NR. Though since the 80s, Malaysia has gradually replaced its rubber plantations with palm oil trees due to a declining world demand for natural rubber. In the 90s, the steady decline in rubber prices has affected all producer countries. Thailand, principally, has been affected the most by the 37 percent drop in price of natural rubber, given that since 1996, it has stockpiled a huge state inventory of rubber, in effect subsidising plantation owners, when world supply exceeded world demand after 1996. Currently Thailand is the world’s largest producer of natural rubber — about 30 percent.

Chart 3. World Production of Synthetic Rubber (in ‘000 tons)

(Source: International Rubber Study Group (1946-1997))

On the other hand, a key trend we can see is that world production of synthetic rubber is not abating, despite the increase in natural rubber stocks. Synthetic rubber is often looked as a substitute for natural rubber. Given that both trends are on an increase, we can safely conclude that both are growing markets and not predatory markets. We can see therefore that clearly as world prices for natural rubber continue to fall, especially due to greater output from the other rubber producing countries as well as higher worldwide synthetic rubber demand, there is an increasing cost to growing natural rubber in China, instead of 1) importing natural rubber 2) converting to synthetic rubber manufacturing 3) importing synthetic rubber. All three possibilities are cheaper alternatives to the current situation.

1. Examining direct and indirect costs
2. Examining lost productivity

In studying the economic impact of growing rubber in China, it is important to be acquainted with the concept of direct and indirect costs. As the geographical location of Chinese natural rubber is much further north than the usual production regions, between 18° and 24° N. latitudes. Its main growing district are Hainan island and the Xishuangbanna Prefecture in Yunnan. Generally experiencing less idle climate for the growth of NR normally lengthens the immaturity period of young rubber from the usual 5-6 years to 7-8 years, this is especially the case with Xishuangbanna, which also has less than ideal terrain for the growth of rubber trees. Infrastructure linked to the industry is generally poor in all growing areas and transportation to consumption points in other parts of China is expensive.

In Xishuangbanna, Yunnan, seven months of the year are suitable for tapping the rubber which is two to three months shorter than that of Hainan Island. In addition to this, in the last 30 years, Xishuangbanna has been hit by harsh wintry conditions (1970-1971, 1973-1976, and most recently in 1999-2000). This effectively kills rubber trees in the early stages of their growth (around three years old or younger). This adds to the indirect costs of the industry, as a complete harvest may be wiped out by unexpected winters.

Currently almost 70% of the world’s rubber output goes into the manufacture of vehicle tyres, but beyond that, it is also used in the manufacture of adhesives, carpet underlays, conveyor belts, shoes, cellular and foam articles, bridge bearings, automobile components and many electrical insulation and inflatable materials.

We can see from the above graph that Hainan’s and Xishuangbanna’s output growth for NR rises rapidly in the 70s, however since the 80s, growth of the industry, though mostly positive, has seemed to lose steam. The trendline in the 90s suggest a declining one. This makes sense given the lack of low-lying flat land suitable for the cultivation of rubber plantations. The extensive felling of secondary forest to make way for rubber plantations has led to massive soil erosion.

The graph does show that though declining trends can be detected, yet the overall growth situation is positive. This could be because of central planning that allocates growth targets through the use of greater fertilisers and the allocation of more land as well as high yielding varieties of saplings. Though successful in generating greater output, yet is this prudent planning? Especially now, in the midst of a new unfolding world situation, especially caused after the formation of the International Natural Rubber Agreement (INRA). World rubber prices have plummeted in the 90s and given the new shift towards the use of synthetic rubbers as well as the burgeoning rubber stocks held by INRA, as well as NR flooding the markets from developing countries, China’s policy of NR self-sufficiency and high state prices, is not cost-effective. Higher quality and cheaper NR can be imported bypassing local costs associated with collection, and transportation to the main manufacturing centres in China.

Table 2. Comparison of Water Runoff and Soil Erosion Under Varying Vegetation-A Local Chinese Study Undertaken in Xishuangbanna

(Source: 资料来源：汪汇海, 1982 ;also see (Xu 1993))

Based on a local study published in 1982, 汪汇海estimated that soil erosion occurred at a rate 42 times greater in a rubber tree plantation versus its natural habitat of tropical rainforest. This is a worrying figure because it means that whereas a natural habitat would have taken 42 years to lose its topsoil through the natural elements, rubber plantations lose the same in 1 year. Given that rubber has had almost a 40 year history in Xishuangbanna, that is (according to the Chinese study) equivalent to 1680 years of lost topsoil. This causes siltation of the Mekhong River and surrounding rivers, leading to overflowing of banks and flooding of low-lying areas. Until now, this has not been considered a cost, but based on the regression analysis done Table 6. , this could be the major reason why the growth of Yunnan’s rubber industry seems to have negative effects on the growth of the agricultural sector. This points to the fact that year by year productivity is hampered by the loss of valuable and irretrievable topsoil. On a positive note, the study points to the possibility of biodiversity and agroforestry potential. Based on a plot of rubber and tea plants, almost 450 kg/hectare of topsoil was retained per year more than that of the single crop rubber plantation.

Loss in Quality of NR

Quality of NR is affected primarily by its collection methods. It may be contaminated with sand or bark which reduce its strength and fatigue resistance, while wood or string may damage manufacturing machines. It may be overwashed so that naturally occurring non-rubber materials and antioxidants are removed, leading to reduced cure activity and ageing. Again, quality may not be homogeneous within given batches, being featured by uneven drying and other climatic or growing conditions, especially NR that is collected from smallholdings.

3. Xishuangbanna,Yunnan’s Rubber Industry

The first rubber processing centres in Yunnan were constructed in the townships of Jinghong, Manli, Nanlian in 1956. In 1957, another was constructed in Galanba township, Mengyang township, and in 1958 in Mengla, Daluo, Guanglong, Dongfeng and Damenlong townships. Six more were constructed in Menglun, Mengxing, Mengyuan, Mengbang, Mengkuang in 1959. From 1963, reorganisation of the smaller processing centres integrated all the centres into 6 main centres and 39 smaller centres with 413 workunits.

Chart 5. China and Yunnan’s Production of Natural Rubber (various years)

In 1974 less than 10% of actual rubber production came out of Xishuangbanna, Yunnan, which means that Hainan Island accounted for almost 90 over percent of Chinese domestic rubber industry. With high guaranteed prices for rubber by the government as well as large scale state farms, this percentage rose to around 30% in 1990s.

In 1982 in Xishuangbanna, an official study was undertaken by the local government to monitor the growth of rubber trees after the usage of newer strains of higher yielding rubber trees. Altogether three areas were examined.

(Source: Yunnan Shengzhi, 云南省志1986)

As seen from the above table, most trees have to wait until after the 8^th to 10^th year of its growth before starting to yield latex. This when compared to regions in Malaysia and Thailand which takes about 5 years represents a significant loss in productivity during the wait period.

Chart 6. Location of Tyre Producing Industries and Relative Size in 1995 (‘000 tyres)

(Source: The 1995 Statistical Yearbook in Provincial Perspective. 中国统计年鉴)

In Yunnan, based on the Yunnan Shenzhi, 1986, it was reported that the total production of the tyre manufacturing industry in 1985 reached 467013 tyres, valued at 6458 thousand yuan (1980 prices) This represents roughly about 34% of the total worth of Yunnan’s rubber manufacturing industry. Though this percentage may look large, but according to the 1995 Statistical Yearbook in Provincial Perspective, Yunnan represents only 1.5% of the entire rubber tyre production in China.

(Source: Yunnan Shenzhi, 云南省志1986)

*in nominal terms

In light of this fact, we can see that locating rubber manufacturing industries in Yunnan, of which most of the largest factories are in Kunming, may not be cost efficient. The apparent decision to invest in rubber trees in Yunnan could be seen as a positive money-earner for those involve it, however the opportunity cost, i.e. the possibility of earning on other more lucrative crops, seems extremely high, especially in view of the significantly longer wait period.

4. China’s Reliance of Foreign Imports of NR

Based on a 1992 study undertaken by the International Rubber Study Group, China ranks as the second largest consumer of natural rubber in the world, behind the United States. It’s total consumption in 1990 was 600000 tons while its local production only provided 264000 tons , as such 340000 tons (57% of consumption) were imported in that year. Given that China has progressed rapidly in the 1990s with a stance of embracing a capitalistic economy, the importing of natural and synthetic rubber as raw materials, has skyrocketed as shown in the table below.

(Source: China Customs Statistics Yearbook 1998)

All in all, almost 6.7 billion yuan in 1998 went into importing rubber in its primary forms for manufacturing, of which natural rubber accounted for about 432 thousand tons (a 27% increase from the 1992 figure) and synthetic rubber accounted for 273 thousand tons (not accounting for other forms of synthetic rubber as mentioned in footnote 4). When one realises that in 1997, Xishuangbanna and Hainan Island accounted for roughly 154 thousand and 284 thousand tons of natural rubber respectively. It would seem that domestic production will fall far short of domestic needs.

5. Estimating the Economic Impact of NR in Yunnan, China and Hainan Island

In evaluating the economic impact of NR in China, a basic methodology was used. Using the provinces’ individual Total Productivity of Service (TPS) for agriculture, a time series model is employed based on previous year’s performance of TPS(Agri), i.e. this means that past values of TPS(Agri) should influence current values. Once this model is established, natural rubber growth rates are used as an outside regressor. If the growth of the natural rubber industry can significantly improve the accuracy of the model, a higher accuracy will be detected against actual values. Based on this methodology, the final model that was selected had to fulfill two criteria, the lowest RMSE (root mean square error) possible which is often the chief determinant of a representative model, and a forecast plot that is close to the actual plot of values. Both models, Xishuangbanna and Hainan Island are presented in the following page:

It is interesting to note how both models give very different pictures of how the natural rubber industry has affected the local agricultural sector of both Xishuangbanna and Hainan Island. Again it is useful to pay attention to footnote 7, which places severe limitations onto the results that have been portrayed. It is not possible given the constraints on data to ascertain the definite contribution rates of the natural rubber industry to the agricultural sector, however it is definite that Hainan Island has experienced greater returns from rubber production than has Xishuangbanna.

Hainan Island Xishuangbanna, Yunnan

From the above graphs, we can see that in Hainan Island, greater NR growth rates correspond with higher agricultural productivity (hence an upward sloping plot), however in Xishuangbanna, no such relationship exists. Whether NR growth rates are high or low, the agricultural sector of Yunnan province is hardly affected and based on the time-series model in table , it is even suggested that this relationship is negative. This is a worrisome trend especially since this trend encompasses the years 1979 to 1997, which are supposedly high growth years. It would seem then that the earlier explanation of lost productivity (heavy soil erosion, a 5 year longer growth period compared to Malaysia, and a 2 year longer period compared to Hainan, shorter harvesting months) seem to be corroborated. It is also noted that with the existing growth rate of natural rubber in Xishuangbanna petering out, this trend can only get worse.

Based on this study, Hainan Island is on the receiving end of the benefits of investment in natural rubber whereas Xishuangbanna may be experiencing diminishing returns.

6. Policy Recommendations

1. Agro-forestry in Xishuangbanna
2. Using Rubber Trees as Timber

Agro-forestry is widely practiced in many parts of the Philippines and has been promoted in other Southeast Asian countries. Given such a widespread mono-culture cultivation of rubber trees in Yunnan, it would be feasible to practice two or three crop agro-forestry.

(Source:资料来源：龙乙明，1989，橡胶＋茶树群落

的生态和经济效益评价; also see (Xu 1993))

Based on a study published in 1989, a controlled experiment was conducted in the Menglun Botanical Gardens, where the rubber yield between a single rubber crop plantation and two plots of dual crops of rubber and tea were observed for six years. Both Rubber /Tea Plantation Plots 1 and 2 on average yielded greater amounts of rubber than just a single crop of rubber trees. Using the chi-square test formulated by Fisher to test whether both dual crop plots of rubber yields are significantly different from the single crop of rubber trees alone, we get c ² = 77.3958358 for Plot 1, comparing against the control crop (rubber alone) and c ²= 80.1030243 for Plot 2 when comparing the control crop (rubber alone). The critical value for the chi-square test with 5 df is 20.52 at 0.001 level of significance. This means that both Plot 1 and Plot 2 have less than a .1% chance of being similar to the single crop rubber plantation in terms of yield rates since its test statistic is much higher than 20.52.

This suggests that the earlier analysis that the growth of the Chinese Rubber Industry has caused negative returns to the actual Yunnan agricultural growth rate because of productivity loss through the loss of topsoil and other factors is a plausible one. Having a dual crop seems to significantly raise the productivity of even the rubber trees themselves. This points to a new direction in the reafforestration efforts in Xishuangbanna: to intensify agroforestry efforts on pre-existing single crop rubber plantations. Further studies on suitable candidate types of trees can be piloted to ensure the best results.

Currently rubber trees are being used as timber, especially in furniture manufacture. IKEA, the Swedish furniture maker is one of the key forces currently switching away from traditional sources of timber to using more rubber trees. Having the texture and feel of pine wood, it is currently a growing market that is still at infancy.

Areas in Xishuangbanna intending to make a switch away from rubber trees have a profitable solution to this problem. Rubber tree wood as timber is a valuable commodity and the cleared land can be used to grow other profitable agricultural crops that are more suitable for the climate in Xishuangbanna, for example coffee.

6. Summary

From the above evaluation, we can see that clearly Hainan Island has received most of the benefit from cultivating rubber trees in the last 40 years while, Xishuangbanna, Yunnan, has not been as successful. As a result of soil erosion and unfavourable climatic conditions, current productivity cannot be maintained without continual high investment in fertilisers as well as research and development into newer higher yielding rubber seedlings. If the regression model for Xishuangbanna identified in Table 6. is predictive, then the coming years will not be profitable for rubber tree growers. Other more profitable alternative crops will need to be identified and a smooth transition will need to be effected for current growers such as agro-forestry and then later possibly the felling of trees as timber to make way for better cash crop selection.

Bibliography

Barlow, Colin, Sisira Jayasuriya & C.Suan Tan (1994), The World Rubber Industry. Routledge Press.

Cheo, Roland (1999), In Shifting Sands. Examining the Loss of Business Confidence in Asia, McGraw Hill Publishing Pte Ltd

China Customs Statistics Yearbook (1998). Goodwill China Business Information Ltd

Statistical Yearbook of Yunnan (1993)

The 1995 Statistical Yearbook in Provincial Perspective.

World Economic Outlook (1998). International Monetary Fund

Xu Zaifu (1993) " Agroforestry: A New Strategy for Development of Tropical Mountains", Collected Research Papers on the Tropical Botany, v.2. Yunnan University Press.

海南统计年鉴 (various years)

云南省志,农垦志(1986)

云南省志,化学工业志 (1986)

云南统计年鉴 (various years)

Appendix A.

Appendix B.

Cations and Anions Analysis of 4 Villages in Xishuangbanna

HOME
CULTURE
spirituality : design : water : fashion
ANIMALS
amphibia : reptilia : butterflies : panda : takin
TRAVEL
ecotourism : Xishuangbanna : Shangrila : Yunnan : Mekong
KNOWLEDGE
books : Buddhist flowers : consulting : science of ecology : medicine
PLANTS & SEEDS
bananas : ginger : herbs : orchids : trees : succulents : lianas : sacred trees
ART
Gabrielle's traditional motive Chinese jewelry : Wu Jialin's black and white photography
ECOSYSTEMS
rain forests : river banks of the Mekong : pools : sacred forests : sinter terraces : chili growing
CHINESE MEDICINE
AIDS/HIV : asthma : acne : herpes : hepatitis : cancer : diabetes : health tea : malaria : Puer tea : orchid tea
WHOLESALE

NatureProducts.Net
is the Thai internet portal for biodiversity products designed to protect endangered species in cooperation with local ethnic communities
a project of the
TianZi BIODIVERSITY RESEARCH & DEVELOPMENT CENTRE
Xishuangbanna, Yunnan, China
© 2000 - today