Natural Rubber Continues to Be Short of Supply
By Huang Xunjing

Import dependence remains heavy

China is one of the major natural rubber producers in the world.
Both the planting area and the actual output are the fifth in
the world. China is also the largest consumer and importer of
natural rubber in the world. The output of natural rubber in
China was only 533.1 thousand tons in 2006, but the total
consumption was 2.13 million tons, and the imported amount was
1.61 million tons, with the output satisfying only a quarter of
the demand.
   The output of natural rubber in China grew constantly from
2001 to 2004. It increased from 477.5 thousand tons in 2001 to
573.3 thousand tons in 2004. Total growth was 20.06%, averaging
5.02% annually. Affected by strong typhoons in the major rubber
production region in Hainan province, the output of natural
rubber in 2005 was reduced to 510.4 thousand tons, a drop of
10.97% from 2004. The output of natural rubber picked up to 533.1
thousand tons in 2006 but was still 7.20% lower than that in 2004.
   According to statistical data from customs, China imported
1.61 million tons of natural rubber in 2006, an increase of 14.6%
over 2005. Imports were mainly from Thailand, Malaysia and
Indonesia -17.4% smoked sheets of natural rubber, 63.7%
technically specified natural rubber, 15.9% natural rubber
latex and 3.0% other natural rubber. Thailand remained the
biggest exporter of natural rubber to China but with little
growth in recent years. In contrast, imports from Malaysia
increased rapidly in recent years - from 2003 to 2005, in
particular, with growth of around 100 thousand tons each year
- reaching 430 thousand tons in 2006. Imports from Indonesia also
increased sharply - from 46.2 thousand tons in 2002 to 334.5
thousand tons in 2006 -overall growth of 623.38%.

The development of the natural rubber sector is faced with
difficulties

1. Limited land resources restrict development

The natural rubber sector is a typical resource-constrained
sector. The land area suitable for rubber planting is very
limited in China - only 970 thousand hectares - and 70% of it
is already in use. The remaining area is mostly already in
productive use, planted with other tropical crops. It is
therefore not very feasible to increase the output of natural
rubber by expanding the planting area.
   China's cultivation of natural rubber constantly occupied
more land from 2001 to 2006. The growth reached 6.41% in 2005.
Private companies hold the greatest share of the newly added
planted area. Yunnan province has had the greatest increase of
private rubber planting companies. Also Yunnan's planting area
has grown most. Hainan province comes next. The planted area in
Guangdong province has constantly been given over to other uses.

2. The upgrade of rubber plantations lags behind

Despite the growth, it can be said that China's investment in
rubber planting has been inadequate for many years. The newly
added planting area has small, and improvement in practices is
slow. The total newly added planting area from 2001 to 2006 was
only 186.7 thousand hectares. Most of the newly added area was
planted only after the 2003 price rise of natural rubber. The
upgraded area of rubber plantations is very limited. The total
upgraded area of rubber plantations increased only 25.2 thousand
hectares from 2001 to 2006.
   Rubber trees planted in the past few years will start
production after 2010 and the output of natural rubber will
increase considerably at that time.

3. The "going out" development strategy produces limited results

China proposed a "going out" development strategy in recent
years, hoping to solve, to some extent, the problem of
insufficient output of natural rubber. Guangdong Land
Reclamation Group Corporation has established natural rubber
processing plants in Thailand and Vietnam, and the actual
processing volume was 25 thousand tons in 2006. Yunnan Land
Reclamation Group Corporation executed a
"rubber-replacing-drugs" planting project in Burma. Hainan
Natural Rubber Group Corporation also signed a rubber planting
agreement with Cambodia. It seems that the "going out" strategy
has established a sound development trend. There are however
many problems in investment cost, political risk and dual
taxation. In the long run, the "going out" development strategy
will contribute to solving the problem of insufficient output
of natural rubber. In the near future, however, the problem is
far from a final solution.
   Needless to say, constraints on the production capacity of
natural rubber in China are many sided. To cite a few examples,
government policy, enterprise management, rubber plantation
management, rubber harvesting and weather conditions can all
influence the utilization of the rubber plantation capacity.

The supply gap will become wider

In keeping with China's overall economic development trends, the
demand of natural rubber will grow further during the Eleventh
Five-year Program period (2006-2010)and the supply gap will
become wider. It is expected that the supply of natural rubber
in China will be 600 thousand-650 thousand tons in 2010. Most
of the market demand will have to be satisfied by imports at that
time.

Planting Areas of Major Rubber Production Regions
    in China from 2001 to 2006       (thousand hectares)
Year      2001    2002    2003    2004    2005    2006
Hainan province
        369.1    368.9    379.8    391.0    395.1    415.1
Yunnan province
        216.0    221.7    242.3    267.3    306.5    326.5
Guangdong province
        36.7    35.2    33.8    33.4    34.6    34.6
Source: CNCIC