Dirty Laundry: Are Chinese Legal Ivory Factories Using Poached Ivory as an Input?

Abstract

It has been alleged or suspected that the legal ivory factories in China launder poached ivory to make carvings. In this research the throughput of tusks across all 37 factories is analysed. The period covers the first allocation of tusks by the Chinese State Forest Administration in July 2009 up to January 2014. The number of factories is fixed, the number of carvers is stable and ivory carving is time-intensive. Diversion of carver-effort to use illegal ivory must come at the expense of legal output. If laundering is occurring it should have an appreciable effect on the rate at which legal tusks are consumed as carvings. The throughput of 1293 tusks is analysed with two modelling approaches. These were a Vector Error Correction Model (VECM) and a Seemingly Unrelated Regression (SUR) approach. Tusk throughput is affected by the size of the tusk and the experience of the carver. Factories also report tusks used up in production in batches. The models show that this reporting effect is partly explained by the Chinese retail spending cycle. No significant deviation in tusk throughput is detected. This implies that the legal factory system is largely clean of illegal ivory. The results also provide indirect evidence that the illegal ivory entering China is destined largely for a speculative market in raw ivory or for an autonomous illegal factory network.

Keywords: CITES, Elephant, ivory, ivory trade, poaching, smuggling, wildlife economics

JEL Classification: C33, K42, Q28, Q57