The report, released after five years of research by a coalition of international and Chinese organisations, called for governments and the forestry industry to increase transparency and crackdown on corruption driving illegal logging.

About 70 percent of all timber imported into China is converted into furniture, plywood and other processed products, and then exported, according to the report.

"This booming trade coupled with China's own domestic growth and demand for paper products is having a devastating impact on forests and poor forest communities globally," it said.

"Few consumer realise that the cheap prices they pay are directly linked to the exploitation of some of the poorest people on Earth and the destruction of their forests," said Andy White, the report's lead author, in a statement.

The report also suggested that China could boost its own timber production, reduce its reliance on raw material imports and alleviate rural poverty if it strengthened property rights and allowed people to invest in forest production.

The report was compiled by the Washington-based, non-profit Forest Trends, the Center for International Forestry Research (CIFOR) in Jakarta and the Center for Chinese Agricultural Policy (CCAP).

Imports of forest products from China bound for the United States and European Union nations have increased almost 900 percent since 1998, it said. The US now accounts for almost 40 percent of all forest product imports, by far the largest destination of Chinese exports.

China, meanwhile, has become the world's leading importer of wood from tropical developing countries and has captured one-third of the global trade in furniture over the last eight years.

"It is clear that China is in the middle of a global commodity chain, feeding consumption by consumers in the US and EU who are demanding low-priced forest products," Michael Jenkins of Forest Trends said in the statement.

The report in particular called on the Chinese government to ensure that all contracts require the purchase of only verifiably legally produced and traded wood products in the leadup to the 2008 Beijing Olympics.

The release of the report came after European floorboard producers and retailers were accused earlier this week of selling tropical hardwood that has allegedly been stolen from eastern Indonesia's Papua province.

The report by the international Environmental Investigation Agency (EIA) and the Indonesian forestry group Telapak explored the multi-million-dollar business of smuggling rare merbau hardwood from Papua.

It alleged that members of the European flooring industry were unable to prove their timber came from legal sources, accusing them of making misleading assurances that the wood was culled from sustainable forests.

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