The China Paper Industry - An Analysis of the Growth Forecast

Published Date : Jul 15, 2014

Historically, China has been a key market for paper. However, in the contemporary scenario, the paper industry in China as we know it today, developed after the country became a part of the World Trade Organization in 2001. This reflects in the trade figures. In 1999, China’s total paper and paperboard output was estimated at 29 million tons. However, in 2010, less than a decade after the country became a WTO member, this figure escalated to 100 million. The compounded annual growth rate (CAGR) for the period between 1999 and 2010 was 11.9%.

However, following this long growth trend, the paper industry in China began showing a decline - this was mainly attributed to the large base amount. As of 2013, the volume of machine-made paperboard and paper touched about 115.14 million tons. This marks a mere YoY growth of 1.22%.

The structure of the China paper industry

There is an abundance of paper manufacturers in China - but they have a low industrial concentration. According to industry estimates, there were about 7,000 paper and ancillary product manufacturers in China at the end of 2013. On an average, each manufacturer’s annual production was lower than 20,000 tons. This figure is noticeably lower than that of other developed countries. Of the 7,000-odd players in China’s paper industry, only about six manufacturers boast an output of over 2 million tons in terms of volume. And, only ten other manufacturers report an output volume of 1 billion tons as of 2012. 

In 2013, there was no instability reported in China’s export-import of waste paper, paperboard, and wood pulp. The volume of imports remained relatively stable, but a rebound was noted in China’s paper export volumes. Around the same time, the unit price of import increased marginally, whereas that of exports saw a steep decline. The import values saw very little change. But on the other hand, the export value saw a substantial dip. As of 2013, trade deficit continued to exist between export and import of paper products and wood pulp in China.

A brief overview of China’s paper export-import landscape 

China’s paper export volumes are less than 10% of its total domestic paper output. The export limit for paper is restricted by the Chinese government so as to protect the environment and curb large-scale felling of trees. Moreover, the paper export industry in China doesn’t enjoy a tax rebate, as many other industries here do. This is compounded by the fact that the paper industry here in general, is not offered subsidies, and there are several restrictions on the processing of waste paper.

Elsewhere in the world, major paper manufacturing nations have successfully integrated pulp, paper, and forest. But China’s forest-paper system is conspicuous by its absence among Chinese paper manufacturers. As a result of this, the availability and supply of qualified paper fiber is largely dependent on imports. 

These reasons are collectively responsible for paper manufacturers in China reporting low profits and the overall unstable state of the industry here. China needs to address problems pertaining to the insufficient availability of raw fiber to the paper industry. 

Problems facing the China paper industry

Currently, four key problems prevail in the Chinese paper industry, and they can to be addressed via regulatory reforms and industrial initiative. The four problems are:

  • A shortage of resources resulting from high geographic concentration. 
  • A product structure that is not regarded as being fair to the industry
  • A low level of production resulting from obsolete machinery
  • Persistent environmental pollution concerns in the country

The Chinese economy is on the fast lane to development. And this will evidently boost the demand for paper in applications ranging from stationery to packaging to publishing and more. This will create several opportunities, and the industry needs to resolve its problems to harness the maximum potential of these business prospects.

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