Healthy GDP keeps investment flowing to China: new government policies and burgeoning demand are creating a good investment climate in China.
The behavior of Chinese nationals studying in foreign countries is another indicator of the country's domestic development. In the past, they remained abroad whenever possibilities existed; now, more foreign-educated Chinese consider moving back to the mainland to work and live.
A BOOMING MARKET
China's paper and board market is huge and will continue to grow rapidly. This growth is obvious when looking at Fig. 1. Today, China consumes more than 38 million metric tons/year of paper and board and produces 32 million metric tons/year. Imports of paper and board were 5.6 million metric tons in 2001, while chemical pulp imports reached 4 million tons. Chinese economic growth has been enormous shine 1982. in recent years, Chinese authorities have had difficulties tracking records, and reliable figures are not currently available--all figures are estimates.
China's paper and board market has grown rapidly, in contrast to North America's. The 30 kg annual per capita consumption in China today is less than 10% of the American demand, which provides some perspective on future opportunities.
SOCIALIST "MARKET ECONOMY"
As in other countries, growth in Chinese paper and board demand is closely linked to growth in the gross domestic product (GDP). China supports this growth by policies designed for a "socialist" market economy, which means there are certain controls on the "free market." The Chinese government allows privatization of companies, but gradually and under certain conditions. Private business has shown potential for aggressive growth. More state-owned companies have been sold to the public, although a majority control in many cases remains in government hands. Private enterprise still has less than a 1/3 share of total production, but that is growing.
The Communist Party needs a high growth economy. This can be accelerated with the help of motivated businessmen. The Party is, therefore, not an enemy of business; it is striving toward the same targets--growth, profitability, and prosperity. In this respect, profitability is--as it is in other parts of the world--a measure of healthy operations.
ADVERTISING: THE DRIVING FORCE
Modern advertising is penetrating Chinese society. Television is widely used as an advertising channel, but small, local businesses are increasingly using printed media. The printing industry is well prepared; printing machines are modern and require good quality coated paper for the best publications. Newsprint media are also developing rapidly--multi-color newspapers are already common in large Chinese cities.
Chinese demand for paper and board grew 1.6-1.8 million tons in 2001 from the numbers in Fig. 2, primarily through domestic production increases. Newsprint production climbed to 160,000 metric tons last year. Official statistics will be available in April 2002.
Considering the prospects, the fastest growth will take place in high quality paper and board, including coated grades, and in newsprint; these media are under-utilized in China.
The share of nonwood fiber in total pulp production decreased during the latter part of the 1990s. Problems with nonwood fiber include pollution, small scale and inferior paper quality. Yet production costs of nonwood papers are typically lower than Western papers, partly due to the "free rider" approach--they require no waste treatment. Paper quality also suffers due to low technology production methods. The growth of China's large-scale industry, then, depends on imported wood fiber or imported/domestic recycled paper.
THOUSANDS OF SMALL MILLS
The chinese paper and board industry has traditionally been a "light industry" sector, typically running mills with capacities of 5000-10,000 metric tons/year. Such mills may have two to four paper machines, each producing five to 10 metrics tons/day. This situation is changing. The government has banned high-polluting mills in urban areas. Since the mid 1990s, about 2000 tiny, polluting mills have been closed.
Still, about 5000 mills remain in China. The focus is on large mills that aim for production rates of more than 100,000 metric tons/year. Traditional non-wood pulp and paper mills have faced tightening regulations. They must build chemical recovery plants if they want to continue production.
Today, China's pulp and paper industry comprises several distinct sectors:
* Small non-wood and recycled fiber based mills using local machinery with capacities of 8-30 metric tons/day. China has about 4000 such mills.
* Medium sized domestic mills (of which there are about 130) using a mix of wood fibers and/or recycled content product (RCP) or non-wood fibers. The largest machines have capacities of 20-100 metric tons/day. These mills have a capacity range of 30,000-60,000 metric tons/year.
* Large domestic mills (of which there are about 50) that have been selected as "spearhead" mills, using primarily wood and RCP fibers, with capacities of 60,000-300,000 metric tons/year: Such mills exist in coated board, fine papers and especially in newsprint. These mills include Jiamusi Paper, Shandong Huatai, Shandong Chenming, Guangzhou Paper, Heilongjiang Black Dragon Qiqihar mill, Nanping Paper, Shixian Bailu Paper, Jilin Paper, Yueyang Paper, Yibin Paper; Rizhao Pulp and Paper, Mingfeng Special Paper, and Shandong Sun Paper.
* Foreign invested pulp and paper mills with world class machinery, such as StoraEnso Suzhou, APP Ningbo, UPM-Kymmene Changshu, APP Dagang, Nine Dragons, Lee & Man, Papco Potential Paper, and others.
The small mills typically produce paper distant from large cities. They use wheat straw (the most important of the nonwood fibers), reed, bagasse, bamboo or mixed nonwood to produce chemical pulp using a soda process. The Sichuan Zhuhai pulp and paper mill is one example.
SICHUAN ZHUHAI PAPER RUNS 100% BAMBOO
Zhuhai Paper produces 30,000 metric tons/year of paper and board in Sichuan bamboo territory. Yibin Machinery Works, a small local paper machinery engineering company with dozens of installations in China, has supplied all five of Zhuhai Paper's paper machines. The newest machine was built three years ago. Four small machines each produce 5-10 metric tons/day. They are 1.7-m wide, open headbox-machines with two drying cylinders running at 100 m/min. The fifth machine is 2-m wide, runs at 300 m/min., and has a closed headbox, fourdrinier, three-nip press and multicylinder drying. This large machine is flexible: it runs different grades, from fine papers to wrapping papers and boxboards. When the price of pulp increases to more than 4,000 Yuan per metric ton (US$ 1 = 828 Y), the mill dries pulp with the "large" board machine.
The company plans to install a 60,000-70,000 metric tons/year bamboo market pulp line during the next five years. There are several bamboo pulp users in the area, including Zhanjiang Packing and Yibin Newsprint.
MANY POLLUTING MILLS CLOSED
Many polluting mills have been closed in the heavily populated Eastern provinces--especially those that have large rivers. The author visited such a mill in Changshan County, in Southern Shandong. Liaoning and Shandang have been serious about curtailing pollution. Officials there force mills to stop production if they do not install chemical recovery equipment.
Zhao Zhide, manager of the Changshan mill, led the tour of the operation, along with the county director. Pulp mill capacity is 28,000 metric tons/year; paper mill capacity was 50,000 metric: tons/year. There are seven paper machines. Six are 1.76-m wide, with total capacity of 25,000 metric tons/year (4000-5000 metric tens/year each). One is a recently built fine paper machine from Shanghai Machinery with a capacity of 70 metric tons/day, or 25,000 metric tons/year (width is 2.64-m and speed 350 m/min.). This latest machine was built in 1999, but never really started up; some trial runs were produced before the machine was shut down.
The mill was shut down in 1999 because it lacked chemical recovery. Stakeholders in the mill tried hard to get the mill's 1200 employees back to work. Finally, they landed a Japanese government grant to finance the chemical recovery plant. The plant was ordered from Wuhan Light Industry Machinery, which delivered it with Tianjin Machinery. Price of the plant was Y62 million. The Japanese grant covered 50% of the needed funds; the rest was financed through a state soft loan. Capacity of the chemical recovery plant is sufficient for the production of 25,000 metric tons/year of straw pulp. At the time of this author's visit, the expansion was not ready and the mill was not operating. Financing was not sufficient, and new money was being sought to complete the project.
LARGE UNITS COMING
In addition to the long-established, large-scale operations such as Guangzhou Paper, Jilin Paper, Jiamusi Paper, and others, medium scale producers that have recently invested in new operations include Nanping Paper, Black Dragon Qiqihar Mill, and Rizhao Pulp and Paper.
Nanping Paper; located in Fujian Province, started up a new 180-200,000 metric tons/year machine in July 1998. Project costs were 720 million RMB (US$ 87 million). A newsprint mill with four small machines (each 3.2 meters wide producing 30,000-40,000 metric tons/year), Nanping bought a modern 1800 m/min., 6.1-meter wide machine from Metso Paper to make the mill profitable again. The new machine's furnish is half TMP, and the grade produced is the Chinese standard 48.8 g/[m.sup.2] newsprint. The investment was very successful. Quality competitiveness was such that the mill filled its order books for one year shortly after start up.
In China, the newsprint industry is in the government's hands, with the exception of Shanghai Papco Potential Paper and, in part, Black Dragon, which is a publicly listed company. Hansol Potential installed a new 5.2-m wide newsprint machine in 1998 with a capacity of 120,000 metric tons/year At that time, Guangzhou Paper Mill was in the process of installing an 8.6-m wide, 130,000 metric tons/year second hand machine transferred from Ortviken, Sweden, which had a gap former as well.
Nanping's success has prompted other newsprint suppliers to move fast. Domestic production of newsprint has also increased rapidly, from 500,000 metric tons in 1990 and 800,000 metric tons in 1905 to 1.6 million metric tons in 2001. Still, China imported 210,000 metric tons of newsprint in 2000. Recent investments in newsprint have been carried out by Huatai, Guangzhou and Yibin (second hand machines, 100,000 to 160,000 metric tons/year each); Qiqihar, Shixian, and another Huatai machine (new 180,000 metric tons/year machines). New machine investments are being planned by Jiangxi, Papco, Yibin, and Guangzhou (new machines). Machines with LWC capabilities are being built by Yueyang and Huatai, with an SC-option machine being built at Shixian. Qiqihar, and Nanping are both planning another similar new machine as recently built.
DIFFERENT APPROACHES ON THE EAST COAST
On China's east coast, access to raw materials is easier due to sea transportation. The government supports expansion of wood pulp production throughout China with soft loans, which are available for foreign companies as well. The government requires large projects to have a plan showing how wood raw material needs will be met. Plantations of pine, larch, poplar, acacia, and eucalyptus are crucial for the industry. The paper industry is developing additional plantations, although forestry, companies are the primary actors. China desperately lacks wood. This situation will probably be improved through the government plan to combine its forest and paper industries, matching other countries.
Some projects, such as APP Dagang (1.1 million annual metric tons of coated fine paper at two giant, 10.5-m wide paper machines and oft-machine coaters), and the Changshu mill (370,000 metric tons/year of coated and uncoated fine paper, originally built by Indonesia's April and later taken over by UPM-Kymmene) have been integrated to the pulp produced in other countries by their owners. StoraEnso's Suzhou mill produces 150,000 metric tons/year of art papers on its one machine, and imports all its raw materials.
SHORT- AND LONG-TERM
Both the short-term and the long-term prospects for the Chinese paper and board market look promising. Even after the substantial investments made in the market during the 1990s, there are many new projects being planned and implemented. The rapidly modernizing Chinese economy should demand ever-increasing levels of paper and board production.
Fig. 2: Demand by grade (metric tons) Consumption, Growth, % Production, million tons per annum million tons 1990 2000 1990 1990 2000 Newsprint 0.52 1.65 11 0.51 1.45 Uncoated WC 0.05 0.10 7 0.00 0.10 Coated WC 0.01 0.09 28 0.00 0.05 Uncoated WF 2.90 7.48 9 3.11 7.46 Coated WF 0.27 1.93 20 0.16 0.92 Tissue 0.80 2.42 11 0.68 2.48 Wrap/Pack 1.96 4.41 8 1.80 3.70 Liner/Fluting 3.96 11.68 11 3.57 9.60 Cartonboard 2.05 4.42 8 1.88 3.45 Other 1.93 2.15 1 1.95 1.90 TOTAL 14.45 36.31 9.2 13.66 31.10 Fig. 3: Paper making raw materials in China (metric tons). Pulp statistics Consumption, Production Share 1000 tons 1000 tons % 1990 2000 1990 2000 1990 2000 RCP, domestic 3750 12240 RCP, imported 425 3705 26 44 Mech. Pulp 420 700 420 700 Semi-chem./other pulp 100 500 100 500 Chem. wood pulp, domestic 996 2500 996 2500 14 23 Wood pulp, imported 342 3519 Nonwood pulp 8509 12900 8509 13000 62 42 TOTAL 14542 36064 10025 16700 RCP collection rate, % 26.0 33.7 Pulp import, % of consumption 3.3 17.4 CHINESE PAPER AND BOARD INVESTMENT PROJECTS, START UPS 2002-2004 MILL LOCATION Taishan Mill Shandong Minfeng-Zanders Zhejiang Guitang Liu Hua Guangxi Hengan Holding Company Changde, Hu Vinda Paper Xinhui, Gd Maanshan Paper Mill Anhui Pinghuo Jingxing Paper Mill Zhejiang Qihe Board Mill, Chengming Shandong Shanying Paper Maanshan Zhumadian Baiyu Paper Jindaxing Paper, PM1 Tianlin, Guangxi Jindaxing Paper, PM2 Tianlin, Guangxi Meili Paper Mill Ningxia Linqing Paper Making Shandong Dong Guang Nine Dragons Paper Dong Guang, Gd Jilin Paper Co. Ltd. Jilin Yanbian Shixian Bailu Paper Jilin Chenming Paper Hanyang, Wuhan Shenzhen Wangda Paper Minfeng Special Paper Co. Ltd Jiaxing, Zh Shandong Rizhao Yellow Sea Pulp Rizhao, Sd Dongying Huatai Paper, Bing Zhou Mill Shandong Lee&Man Paper Mill Guangdong Zhaozhou Paper Mill Hebei Baite Paper Shaaxi Luohe Yinge Pulp & Paper Luohe Wan Li Da Yaxin Leshan Paper Mill Sichuan Guitang Liu Hua Guangxi Yueyang Paper Hunan Black Dragon Paper, Qiqihaer Paper Heilongjiang Jiangxi Paper Co. Nanchang, Ji Bohui Paper Zibo, Shandong Zhejiang Yongtai Paper Fuyang Shandong Sun Paper, Yan Zhou Shandong Gaotang Paper Shandong Minfeng Special Paper Co. Ltd Jiaxing, Zh Papco-Potential Paper Co. Ltd., or Hebei Papco-Potential Paper Co. Ltd. Baoshan, Shandong Yibin Paper Industry Yibin Yalujiang Paper Dandong, Liaoning Guangzhou Paper Guangdong Nanping Paper Mill Fujian MILL START CAPACITY GRADE UP MTPY(000) Taishan Mill 2002 100 LWC Minfeng-Zanders 2002 23 Tracing paper Guitang Liu Hua 2002 28 Tissue Hengan Holding Company 2002 32 Tissue Vinda Paper 2002 25 Tissue Maanshan Paper Mill 2002 200 Liner, Fluting Pinghuo Jingxing Paper Mill 2002 200 Linerboard Qihe Board Mill, Chengming 2002 150 Linerboard Shanying Paper 2002 150 Linerboard Zhumadian Baiyu Paper 2002 40 Uncoated woodfree Jindaxing Paper, PM1 2002 60 Newsprint Jindaxing Paper, PM2 2002 60 Newsprint Meili Paper Mill 2002 40 Coated woodfree Linqing Paper Making 2002 200 Corrugated medium Dong Guang Nine Dragons Paper 2002 400 Linerboard Jilin Paper Co. Ltd. 2002 200 LWC Yanbian Shixian Bailu Paper 2002 180 Newsprint, SC-B Chenming Paper 2002 120 Uncoated woodfree Shenzhen Wangda Paper 2002 150 Linerboard Minfeng Special Paper Co. Ltd 2002 100 Coated woodfree Shandong Rizhao Yellow Sea Pulp 2002 150 LPB, Coated board Dongying Huatai Paper, Bing Zhou Mill 2002 150 Newsprint Lee&Man Paper Mill 2002 330 Liner, Fluting Zhaozhou Paper Mill 2002 150 Cartonboard Baite Paper 2002 85 Coated board Luohe Yinge Pulp & Paper 2002 100 Coated woodfree, LWC Wan Li Da 2002 150 Liner, Fluting Yaxin Leshan Paper Mill 2003 100 Uncoated woodfree Guitang Liu Hua 2003 28 Tissue Yueyang Paper 2003 120 Coated woodfree, LWC Black Dragon Paper, Qiqihaer Paper 2003-4 180 Newsprint Jiangxi Paper Co. 2003 180 Newsprint Bohui Paper 2003 100 Coated board Zhejiang Yongtai Paper 2003 150 Cartonboard Shandong Sun Paper, Yan Zhou 2003 150 Coated board Gaotang Paper 2003-4 200 Coated woodfree Minfeng Special Paper Co. Ltd 2003-4 65 CWF, Photo paper Papco-Potential Paper Co. Ltd., or 2003-4 200 Newsprint Papco-Potential Paper Co. Ltd. 2003-4 200 Newsprint Yibin Paper Industry 2003 160 Newsprint Yalujiang Paper 2003 120 Newsprint Guangzhou Paper 2004-5 280 Newsprint Nanping Paper Mill 2004 200 Newsprint
About the author: Hannu Oinonen is an economist, engineer and independent market and technology researcher based in Finland. He has carried our extensive research in Asia and is the co-author of several reports on the Asian paper industry. He can be reached at firstname.lastname@example.org
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|Title Annotation:||Country Report|
|Publication:||Solutions - for People, Processes and Paper|
|Date:||Apr 1, 2002|
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