Plant a tree - then import illegal timber

The paradox of China's policy to combat deforestation

It was annual Tree Planting Day and Chinese state television was showing pictures of obedient peasants carrying saplings and covering roots with soil. Barren hillsides were being reforested. The commentator urged everyone to join in and turn China green.

It so happened that I spent the day wandering the timber yards of Shanghai looking for merbau, an endangered hardwood grown in Indonesia. After flash floods in the early 1990s, China woke up to the damage deforestation was doing to its watershed, banned most logging and embarked on a massive tree-planting programme. But as domestic construction and manufactures for export drove growth, Chinese companies started to import hardwood from endangered forests as far afield as Gabon, Equatorial Guinea and Brazil.

Indonesia is one of the few countries which have tried to curb the trade. Alarmed that the nation was losing nearly three million hectares of forest every year, the Indonesian government banned the export of merbau logs and rough-sawn timber because the rainforest of West Papua - the last province in the country where virgin merbau grows - was being destroyed.

In 2005, the Environmental Investigation Agency, a British NGO, and its Indonesian counterpart, Telapak, revealed how merbau was being smuggled to China, processed into hardwood flooring and sold to Europe and the US. The Indonesian government launched an operation to arrest illegal loggers and timber traders, but a new report says that the most important suspects have been released or acquitted.

"It hasn't touched the people at the top - the timber barons, the military and police," said the EIA's Julian Newman. "When the enforcement began, some influential people behind the logging stood back, waiting to see what happened, but now they're seeing no one is being prosecuted, no one of any note is being brought to court, so they're back in the game again."

Last November, EIA researchers, posing as potential buyers, secretly filmed timber traders in the Indonesian port of Surabaya saying that they exported square logs and rough-sawn merbau in containers to China. Every now and then customs officials would inspect cargo, but nothing would be delayed for long.

The video shows Riki Sumandi, the director of Lido CV, an Indonesian company, saying: "Maybe for one or two months there is checking from the central government to the customs here. So customs tell us the moment to stop . . . like last time, we stopped about two weeks, but then we go." He says he exports 50 containers of illegal merbau to China every month. His partner Riki Gunawan admits that the trade is "non-legal".

According to the EIA, the money often goes through Hong Kong or Singaporean middlemen. When I rang Sumandi, he said I could not prove my allegations if there was no deposit of money from China into his account.

"We have never exported rough-sawn or logs," he said. "You've got the wrong Riki," and he proceeded to accuse Riki Gunawan, his business partner, of being involved in the illegal merbau trade.

It took us about five minutes to find what we were looking for in the Shanghai timber market. A carefully stacked pile of rough-sawn, square red planks was clearly labelled in blue chalked Chinese characters: "Indonesian merbau". A trader told us we could buy from him to export to Britain - if breaking Indonesian law was a problem, we could say it was a different kind of wood from China.

At the Yangtze port of Zhangjiagang, two hours' drive upriver from Shanghai, we found merbau logs, roughly squared off. Under tightened Indonesian regulations, it's no longer on display at the main log yard, but - again - it took us less than five minutes to find a trader who could show us his stash.

Our final stop was Nanxun, which advertises itself as "the hardwood flooring capital of the world". Dozens of flooring factories line the main road. Inside, hardwoods that have been cut into planks in Zhangjiagang or Shanghai are cut, planed and varnished into half-metre-long flooring slats. Most are used in China's construction boom, but some planks make their way to Europe and the United States, where the wood's origin is often obscured.

At the Huzhou Yongxiong flooring factory, a young manager told me they could manufacture 50,000-60,000 square metres of merbau flooring every month. Presenting myself as a potential customer, I asked what to do if British customs blanched at importing flooring made from Indonesian merbau. "We just label it 'Made in China'," he replied.

The European Union is negotiating an agreement with Indonesia to ensure that any merbau products it imports are legally felled and sourced, but as long as China is a "back door", such agreements will remain futile.

The last factory we visited, the Zhejiang Fang Yuan Wood Company, had been featured in a previous EIA report as a major producer of illegal Indonesian merbau products. The young man who showed us round said the factory no longer made flooring from merbau because it was too expensive. "The trees are running out," he explained, cheerfully. I asked whether it wasn't possible to replant. "Oh no," he said. "Trees like that take hundreds of years."

But the lack of Indonesian merbau, he said, was not a problem - the factory was producing flooring made of Burmese teak instead. "We have a good stock of that," he said. "For the moment."

Lindsey Hilsum is China correspondent for Channel 4 News