China: Restructuring the paper sector to suit a globalised industry

29 Jun

The Chinese pulp and paper industry is being restructured, at the expense of rural farmers.

By Chris Lang. Published in WRM Bulletin 83, June 2004.




Since 1996, in an attempt to control pollution, China’s State Environmental Protection Administration has closed thousands of pulp and paper mills. “A significant portion of urban as well as rural water pollution problems came from industry and, in particular, the pulp and paper industry,” commented the World Bank in a 2000 report about China’s pulp and paper industry.

China has closed down 7,000 small mills according to Petteri Pihlajamaki of Finnish forestry consulting firm Jaakko Pöyry. “The Chinese pulp and paper industry caused more pollution than the pulp and paper industry of the rest of the world combined,” he told Tove Selin, Coordinator of the Finnish NGO campaign to reform Export Credit Agencies.

Before 2000, only ten per cent of China’s pulp was produced from wood. Most of the closed-down mills used non-wood raw material like residues from rice and wheat crops. The World Bank described these mills as “outdated, inefficient, and too small, and they rely heavily on locally grown feedstocks, in particular rice straw.”

The old mills were no doubt highly polluting, but closing mills down was not the only possible solution. In many provinces, selling wheat straw to local paper mills was an important source of income for farmers. Pollution from non-wood fibre mills can be reduced by improving chemical recovery, by reducing the amount of silica going into the waste water and by using alternative pulping techniques.

While the government is closing down pulp and paper mills, China is the world’s fastest growing pulp and paper market. Although per capita paper consumption is less than ten per cent of the amount consumed in the US, China accounts for 14 per cent of global paper consumption. Jaakko Pöyry estimates that consumption will increase at 4.4 per cent a year between 2000 and 2015.

To meet the increasing demand, China increased imports of pulp by more than four times between 1997 and 2003. China is now the world’s second largest importer of forest products (after the US). Sixty per cent of these imports are pulp and paper products.

The restructuring of China’s pulp and paper industry from small-scale mills using local raw materials to massive, modern mills using wood-based pulp has created a bonanza for the consulting firms, machinery suppliers and paper companies that make up the global pulp and paper industry.

During the 1990s, China’s paper industry received around US$1 billion from international financial institutions, foreign governments and foreign direct investment. “China is still the Promised Land as far as pulp and paper equipment suppliers are concerned,” wrote Pulp and Paper International’s editor Graeme Rodden in December 2003.

Finnish-Swedish paper giant Stora Enso announced earlier this year that it would increase the capacity of its Suzhou mill from 160,000 to 240,000 tons a year. Stora Enso has eucalyptus plantations in Guangxi province in south China.

Finland’s UPM Kymmene’s Changshu mill started operations in 1999 and today produces 350,000 tons of paper a year. By 2005, capacity will be increased to 800,000 tons a year, with pulp imported from Indonesia.

Indonesia’s massively indebted Asia Pulp and Paper has plans to build a 600,000 tons pulp and paper mill in Qinzhou, Guangxi province. Raw material is proposed to come from the company’s eucalyptus plantations in south China. APP aims to establish 600,000 hectares of plantations in China.

Japan’s largest paper company, Oji Paper, plans to establish a total of 200,000 hectares of fast-growing tree plantations in China.

Chinese companies are also getting in the act. Yueyang Forest and Paper has 65,000 hectares of plantations and hopes to plant 100,000 hectares with poplar, alder and pine by the end of 2005. The plantations are to feed Yueyang’s 550,000 tonnes a year pulp and paper mill.

The World Bank dismisses China’s small-scale paper mills as inefficient, but it is unlikely that the boom in fast-growing tree plantations in China would have been possible without subsidies.

The Chinese government has set aside US$13 billion for plantation development between 2002 and 2020. The aim is to plant almost 6 million hectares for the pulp and paper industry between 2001 and 2015.

Meanwhile, China is the largest recipient of World Bank loans to the forestry sector. Since 1980, China has borrowed more than US$600 million from the World Bank to establish plantations to feed the pulp and paper industry. In 2002, the World Bank approved a US$93 million loan for a “sustainable forestry development project” in China, aimed at forest protection and “ensur[ing] a supply of wood to meet China’s growing demand”.

China’s small-scale polluting pulp and paper industry, which employed large numbers of people and supported millions of farmers, is being replaced by a modern polluting industry, which employs few people and which relies on vast areas of monoculture plantations to supply its raw materials.

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