Int'l paper producers strengthens presence
By Mo Fan and Wang Jing (China Business Weekly)
Updated: 2004-06-21 14:39

[The authors Mo Fan and Wang Jing are industry experts and contributors to China Business Weekly.]

Foreign paper producers are investing billions of dollars in new factories and production in China as they try to stay a step ahead in the race for a slice of the world's fastest-growing major paper market.

China has become the world's second-largest paper consuming nation, after the United States. It accounts for more than 14 per cent of global paper consumption.

As the world's largest net paper importer, China spends up to US$7 billion, in hard currency, each year on its imports of cardboard, paper pulp, waste paper and paper.

China's paper consumption will reach 50 million tons next year. Its domestic output capacity, however, falls short of 40 million tons, leaving a huge gap of about 10 million tons.

Another 10 million tons of imported paper pulp and waste paper are needed.

Currently, China's paper consumption per capita is a mere 30 kilograms, which lags behind the global average of 56 kilograms.

 China's consumption of paper, per capita, lags far behind other nations. That means there is tremendous potential in China's paper industry.

The huge demand and relatively laggard per capita consumption push international paper-making giants to forge ahead in recent years.

Finland-based Stora Enso Oyj, one of the world's leading paper manufacturers, invested US$150 million in its 150,000-hectare plantation. The site is located in Guangxi Zhuang Autonomous Region.

"Global paper giants have been accelerating their steps to invest in the tree-rich region in southern China, hoping to enter into the retail paper market," said Wu Jian, an economist with the Guangxi Academy of Social Sciences.

Golden Eagle Co, a Singapore-based paper producing company, recently invested US$500 million in its raw material base in Jiangsu Province.

APP, one of the world's top four paper producers, began its tree-planting campaign in 1995. The firm has grown 2 million mu (667 square metres) of forest in China's Guangdong and Hainan provinces and Guangxi Zhuang Autonomous Region.

"Based on our research, there are many places in Guangxi, Guangdong and Hainan suitable for planting broadleaf trees," said APP (China)'s Luo Xin.

The Chinese Government has developed some preferential policies involving the pulp, afforestation and paper and chipboard production industries.

Besides the huge market demands, preferential policies extended by the Chinese Government to localized paper production also push foreign paper producers to invest in the country.

In the 1990s, when high-quality, low-cost imported paper flooded China, the country had to launch an anti-dumping campaign against newspaper and coated art paper.

China, at that time, raised the import tariff on paper, but maintained the zero tariff on imported pulp. That prompted several giant global paper producers to build plants in China.

After that anti-dumping investigation, Japan-based Prince Paper Co established a plant in China.

"All trade problems will be resolved smoothly through local production," said a senior official with the Japanese firm.

Foreign producers must face challenges posed by domestic players.

Last December, Shandong-based Quanling Group announced its plans to raise its paper output volume to 1 million tons.

Some listed companies -- including Anhui Shanying Paper Industry Co Ltd -- have raised financing by offering convertible bonds or A shares to strengthen their performance in the capital market.

"The most competitive companies are always domestic companies, because they are familiar with the domestic situation," said Cao Zhenlei, president of the China National Pulp and Paper Research Institute.

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