China has become the world's biggest buyer of illegal timber, in a trade worth billions of dollars every year and involving criminal gangs, according to a report from the Environmental Investigation Agency (EIA).

As much as 30% of global timber production is illegal, according UN estimates, costing poor countries such as Laos and Madagascar billions in lost revenue and taxes. The illegal trade also fuels the clearance of natural forests and exacerbates armed conflict.

Since the late 1990s China has taken strong measures to protect and grow its own forests, but has built up a vast wood processing industry that has become heavily reliant on imports. In effect, says the EIA, it has exported deforestation overseas.

Also read: Chinese companies using "illegal logging" permits in Congo

While the US, Europe and Australia have taken action to cut out illegal wood imports, China's lack of action is undermining progress in tackling deforestation worldwide. China has signed a bilateral agreement with countries such as indonesia and Myanmar, in an attempt to prevent illegal logging, but the deals have done little to reduce China's imports of illegal timber.

"Any further meaningful progress to safeguard the forests of the world is being undermined unless the Chinese Government acts swiftly and decisively to significantly strengthen its enforcement and ensure that illegal timber is barred from its markets,” says Faith Doherty, head of EIA's forests campaign.

The findings are based on more than eight years of undercover work by EIA investigators, who have worked undercover, posing as timber buyers. The full report Appetite for Destruction also features several case studies from countries such as Laos, Madagascar and Myanmar, whose forests are being severely depleted by illegal deforestation.

The EIA argues China's significant timber deficit (domestic supplies can at best only meet 50% of wood and paper demands) necessitates higher and higher imports. It estimates at least 18.5 million cubic metres of illegal logs and timber were imported into the country in 2011 - worth $3.7 billion - and enough to fill Beijing's Olympic stadium more than six times.

It says Chinese state-owned firms are directly involved in logging operations in countries where illegal logging is rife, such as Myanmar.

“This report makes a clear and concise case for action by China,” added Doherty. “The burden of making any further progress in the international fight against deforestation, illegal logging and the criminal networks behind it now rests squarely on its shoulders.”