【The,Natural,Forest,Protection,Program,in,China:,A,Contingent,Valuation,Study,in,Heilongjiang,Province】The Rap of China

　　Abstract: In 1998, the Chinese Government implemented the NFPP (Natural Forest Protection Program), which included logging restrictions, protected areas, replanting, and a range of other policies aimed at safeguarding the state of the country’s forests and reducing the risk of erosion and flooding. A second phase of this program is currently being discussed. In this paper, contingent valuation is used to estimate the WTP (willingness to pay) for maintaining the program among the inhabitants in Heilongjiang Province in northern China. The results show that, even with fairly conservative assumptions, the aggregated WTP for maintaining the program for another five years is some 3.24 billion yuan per year. This can be compared with the current cost of the Program in the province, which is some 1.57 billion yuan per year.
　　Key words: China, Heilongjiang, natural forest protection program, contingent valuation.
　　1. Introduction
　　In this paper, it studies the WTP (willingness to pay) for continuing the NFPP (National Forest Protection Program)1 among the inhabitants of Heilongjiang Province in China. Maintaining China’s forests is crucial for maintaining forestry activities in the region in the longer term, as well as for reducing erosion and flood risks. At the same time, however, the program entails limiting the scope for forestry activities in the short term. It is, therefore, of interest to study how people in the affected areas perceive the program.
　　Using the contingent valuation method, it is found that people in Heilongjiang see the program as a net positive. Even with the most pessimistic assumptions about their WTP, the overall WTP is found to be considerably higher than the cost of the program, meaning that maintaining the program would generate a net benefit to the population of the Province.
　　2. The Natural Forest Protection Program
　　In 1998, large floods in the Yangtze and Yellow Rivers caused the deaths of 3,600 people as well as economic damages estimated at 248 billion yuan [1].2 To prevent future disasters of this kind, the State Forestry Administration proposed that 95 million ha of natural forest should be protected until 2010 under the NFPP, also known as the logging ban or the Natural Forest Conservation Project. This program entails strict logging quotas, performance targets for state forest companies, and subsidies for afforestation and reforestation, as well as other forest conservation activities [2].
　　The overall goals of the NFPP were to reduce round wood production in the areas concerned in order to conserve about 90 million ha of natural forest, and to afforest or reforest an additional 31 million ha by 2010 through mountain closures, aerial seeding and manual planting [2]. A number of more specific goals were also
　　 set up in 1997, such as a 20 million m3 reduction in overall timber harvests by 2003. A second specific goal was to conserve 42 million ha of natural forest in the upper reaches of the Yangtze River, the upper and middle reaches of the Yellow River, and in Inner Mongolia, North-east China, the Xinjiang Uigur Autonomous Region, and Hainan Province. A third goal was to establish 21 million ha of timber plantations between 2000 and 2005 in the upper reaches of the Yangtze River and the upper and middle reaches of the Yellow River [3].
　　The State Council committed 96 billion yuan to finance the program during the first decade of the 21st century [4]. Some 22 billion yuan had already been spent between 1998 and 2000. Much of this expenditure was in the form of subsidies to state forest enterprises [2, 4].
　　Several different policies have been implemented in support of the NFPP. A special team of forestry police has been established, for example, and full-time guards are being employed to enforce forest protection and restrain illegal cutting. State forest workers are being re-deployed and resettled. Other activities are small investment projects that are being introduced to demonstrate the potential for new, profitable state-owned activities. Provincial governments are also receiving funds from the central government to assist workers who become unemployed as a result of the program. In addition, the central government pays retirees a pension to reduce the cost to state-owned forest enterprises [3].
　　Most research and assessment efforts linked to the NFPP have focused on physical indicators such as changes in harvested timber, newly forested area, and degree of soil erosion (see e.g. Ref. [5] for a discussion of this). Judging by these indicators, the NFPP has largely been successful. Timber harvests from China’s natural forests decreased by over 50% from 1997 to 2000, that is, from 32 million m3 to 14 million m3 [1]. Moreover, in the first years of the program, the harvesting of natural forest ceased in 13 Provinces and, by 2000, the total area without logging had reached 8.9 million ha [5]. By late 2002, 3.05 million ha had been reforested and 2.29 million ha of mountainous lands had been closed off from human activity in order to allow forests to regenerate [6].
　　However, the effects of the program have not been positive for all actors. Directly after its implementation, state-owned wood processing enterprises experienced major reductions in production and export volumes. Before the NFPP, many of the smaller-scale enterprises had operated with old and outdated equipment as well as inefficient management, so there had been little accountability for their costs and revenues. There was also a lack of knowledge about the basic elements of competitiveness under the former centrally planned system. Nonetheless, these enterprises had been viable because of the low price of raw materials. Following the NFPP’s implementation and the consequent increase in competitiveness and in the price of raw materials, several of these enterprises had to reduce or entirely cease production [3].
　　These major changes in output of timber and activity in the state forest companies caused significant changes in their labour structure. Some 1.2 million logging and processing workers worked in the companies concerned. By 2002, however, about two-thirds of these workers had left the sector. To reduce the negative impacts of these changes, local governments and state forest enterprises attempted to restructure the forest industry and boost employment opportunities in other sectors [6].
　　State Forestry Administration sources indicate that approximately 60% of central government subsidies to the affected areas were used for employment costs in state forest enterprises, and that subsidies paid to such enterprises had frequently been higher than their foregone profits. As a consequence of these generous subsidies, those state forest enterprises that had already suffered from reduced forest availability tended to welcome the program and the financial support it provided. State-owned forest enterprises with a
　　 stronger resource base were not as positive towards the program [7].
　　Although most of the major impacts of the NFPP were anticipated, the extent of some of the socio-economic effects was unexpected. There have also been some unforeseen negative impacts on other industries and on local economies. In many state forest enterprise areas, the economic structure has changed from complete domination by timber production to a reliance on multiple industries-a development which was anticipated by the central government. Restaurants, hotels and other service industries have expanded in many forestry areas. However, there are also examples of the opposite effect [5], and case studies conducted by the China Council for International Cooperation on Environment and Development Forest Grassland Task Force suggest that the NFPP has led to income reductions for a range of stakeholders. Forest enterprises, collective forest owners, rural households in the NFPP areas, and local government dependent on the forestry sector for revenue have all been affected[7]. For local governments, revenue has also been substantially diminished by the loss of income from processing and logging [6].
　　Moreover, rural households outside the state-owned forest enterprises have suffered particularly from the loss of access to forest resources and forest-related opportunities. They do not have the same benefits as the workers at state-owned forest enterprises do in terms of the public support programs, since they do not receive compensation for income losses associated with the NFPP [7]. On the other hand, if the NFPP had not been implemented, unsustainable use of the forest in China would have continued, and the loss of forest would have caused income losses at some point in any case. This means that although the program reduces current income, it can increase future income by ensuring future forest availability. It should thus be seen as a shift in income rather than as a reduction of overall income. In addition to these use values from the forest, there are other, non-use values from the forest that are preserved as a result of the program. However, the affected stakeholders might not see it in this light.
　　An average citizen should gain from the Program because, by limiting other people’s use of the forest, it guarantees the maintenance of the forest for future use and ensures that the improved future benefits will be substantially higher than the current loss of benefits. In principle, therefore, people should be prepared to pay to maintain the program. In practice, people may value the current loss of forest use more than the future revenue from conserving the forest, because the current impacts are more certain. By examining whether or not people are, in fact, willing to pay to maintain the program, one can see how highly they value the forest’s future availability.
　　3. The Study Area: Heilongjiang Province
　　Heilongjiang Province is located in north-eastern China (Fig. 1). The Province measures 454,000 km2, and comprises some 5% of China’s total surface area. In this part of China, the NFPP has consisted of a logging reduction rather than an outright logging ban.
　　During the 1980s, major investments were made in the state-owned wood processing industry in northern China since the government believed it would improve job opportunities for the locals. However, because of efficiency problems, this did not happen; and in the 1990s, the state companies were gradually privatised.
　　 The long-term effect of this privatisation has been higher employment and higher wages. After the implementation of the NFPP, more timber was imported from Russia, and a sizeable share of it has since been processed in Heilongjiang.
　　Nonetheless, the implementation of the NFPP has caused major changes in the labour structure in state-forest enterprises in Heilongjiang. As Fig. 2 illustrates, almost half of the workforce was laid off between 1997 and 2000. In the same period, the output of timber from Heilongjiang Province was reduced by about a third (Fig. 3).
　　In this study, contingent valuation is used to measure the WTP among the people of Heilongjiang in respect of maintaining the program. During the period 2004 to 2008, the expenditure on the NFPP in Heilongjiang was, on average, 1.57 billion yuan per year [8].
　　Two cities in Heilongjiang province were sampled, one of which was the provincial capital, Harbin. The city is an important transportation centre in north-eastern China, and several highways and railways are linked to it. Harbin, which has industrialised rapidly in recent decades, is a part of the great Manchurian industrial complex of metallurgical,
　　 machinery mechanical, chemical, petroleum and coal industries. The Harbin area has a population of approximately 9.4 million, of which approximately 3.3 million are urban residents. The city plays a major role in China’s forest industry [2].
　　The other sampled city was Yichun, which has a population of 1.3 million. This makes it a small rural town by Chinese standards. The area is dominated by economic activities linked to the forest, including commercial forestry as well as tourism in the protected forest areas.
　　4. Data and Econometric Specification
　　When conducting the survey in Harbin, the authors recruited the help of students from the North-east Forestry University in Heilongjiang. A total of 80 respondents were surveyed. In the Yichun area, another 81 respondents (all located in the Youhao forest area) were surveyed with help from employees of the Youhao Forest Bureau as well as the students mentioned earlier.
　　The contingent valuation question used a payment card with a list of possible amounts where the respondents simply marked the highest amount that they were willing to pay. This made it easier to use Chinese students and foresters as intermediaries, and was cheaper and less time-consuming than conducting more extensive face-to-face interviews [9].
　　Descriptive statistics from the survey are provided in Table 1. The respondents’ budget constraints were captured by asking about average monthly expenditures on important items. In developing countries, it is generally better to ask for the respondents’ expenditures instead of their income [10]. Moreover, questions about income tend to be very sensitive in China.
　　The options on the payment card ranged from 0 yuan to a WTP that exceeded 350 yuan, with steps of 10 yuan at a time. The payment was described as being an annual one over a five-year period. In order to keep the payment card as simple as possible, the card did not provide an option to state a negative WTP. However, 25 (approximately 17%) of the 151 respondents to the WTP question stated that they were not willing to pay anything. Some of these may well have a negative WTP for the program, meaning that they would be willing to pay to have the program ended. Only four of the respondents stated a WTP in excess of 350 yuan, the upper bound, so this is a less important issue for our analysis.
　　Of the 161 respondents, 159 replied “Yes, always” to a question on whether it was important to preserve the forest, while the last two respondents did not reply to the question. A subsequent question asked the respondents why they thought it important to preserve the forest. The two dominating reasons the respondents gave were “I think it is important to preserve the forest for future generations” and “I think it is important to preserve the habitats for the animals living in the forest”. Both of these reasons are non-use values. Of the 155 respondents to this question, 141 provided only non-use values as their reason for wishing to preserve the forest, while 14 also provided use values. A total of 147 of the 160 respondents further stated that it was
　　 important to protect the environment in general.
　　A robust ordinary least-squares regression was estimated with WTP as a function of income and a set of dummy variables, as follows:
　　? One for the respondent’s place of living;
　　? One for whether the respondent had stated use values as a reason to preserve the forest;
　　? One for whether the respondent thought it important to protect the forest in general;
　　? One for whether the respondent was privately employed.
　　Various combinations of logarithmic and linear specifications, as well as additional variables were also tried, with largely similar results. However, the linear specification performed best in terms of statistical fit.
　　In order to capture the potential additional effect of the zero WTP responses, a tobit function was also estimated, with WTP as a function of the same explanatory variables. As with the OLS version, the linear model performed best in terms of statistical fit.
　　5. Results
　　The mean value of the combined WTP for both Yichun and Harbin is 112 yuan per year for five years. The total population of Heilongjiang is 38 million, of whom approximately 30 million are over the age of 15, i.e. the age cut-off used in our survey. This means that the aggregate WTP amounts to some 3.4 billion yuan per year. This value is much higher than the current annual cost of the program.
　　The results from the OLS and tobit regressions are shown in Table 2. They are largely similar for both these specifications, and the signs of the coefficients are largely as expected. WTP increases with rising income (or, rather, expenditure). Inhabitants in the more rural Yichun area have a higher WTP than Harbin residents. Respondents who had use values for the forest rather than merely non-use values, and respondents who felt that environmental conservation was important in general, had a higher WTP. Less obvious, perhaps, is why privately employed respondents have a higher WTP. However, this result is statistically significant in both the OLS and tobit specifications.
　　Evaluated at the sample mean values for the various explanatory variables, the OLS results give an average WTP of 117 yuan per year-quite close to the actual sample average for WTP. If one interprets the latent variable from the tobit regression as the actual WTP(thus including imputed negative values for those respondents who gave their WTP as zero) and evaluates this model at the sample mean values, one gets an average WTP of 108. Thus, the difference between the OLS and the tobit estimate is not huge, and most of the negative-WTP respondents are imputed to have negative values that are only slightly below zero.
　　6. Conclusions
　　This paper examines if it would be socially beneficial to sustain the NFPP in Heilongjiang
　　 Province for another five years. It is found that 83% of the respondents were willing to pay to maintain the program for that period.
　　The sample average for the WTP is 112 yuan. More sophisticated WTP functions estimated using either OLS or tobit specifications, provide values for average WTP that are similar in size. Assuming that these values are true reflections of the population’s WTP, the overall WTP to preserve the program would be somewhere between 3.24 billion and 3.52 billion yuan per year, which can be compared with the current cost of 1.57 billion yuan per year. Therefore, the results indicate that it would be socially beneficial to keep the NFPP for at least another five years in Heilongjiang Province, even with the current, relatively costly, set-up. Moreover, as mentioned earlier, some of the state forest companies have received compensating subsides that were higher than their actual losses due to the NFPP. Thus, the NFPP is unnecessarily costly, and the net social gains could be made even greater if the funds were used more efficiently. Even if this does not happen, however, the results indicate that the program should continue.
　　Acknowledgments
　　The authors are grateful to Dr. Xuemei Jiang and Prof. Jintao Xu at Peking University as well as Prof. Jun Cao at North-east Forestry University in Harbin for help with practical arrangements and for numerous important insights into Chinese forestry. The authors are also indebted to Yuanyuan Yi, Master’s student at the University of Gothenburg, and Lijuan Liu, Master’s student at the North-east Forest University in Harbin, for help with ideas, contacts, and translation. Financial support from the Swedish International Development Cooperation Agency and from Elforsk is gratefully acknowledged. Any opinions and mistakes herein are the sole responsibility of the authors.
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