China's Paper Makers Seek Overseas Expansion

 

According to an article in this past week’s Want China Times, Taipei, Taiwan, China's paper companies are hoping the country's Silk Road initiatives will help them expand overseas since competition at home has become tight as a result of overcapacity, Beijing's Economic Observer reports. China is the world's largest producer of paper and paperboard, posting an output of 118 million metric tons last year, 6 million metric tons of which was exported. 

The rapid expansion of paper companies in China has created domestic overcapacity of 20%, said Guo Yongxin, deputy head of the China National Light Industry Information Center. He said China has to import pulp to support its paper industry because of the scarce domestic supply of raw materials. 

Shandong-based Huatai Group, the country's largest newsprint maker with a total capacity of 4 million metric tons, sources half of its pulp from abroad and exports its product to dozens of markets, including India, Australia, and Thailand, Gou said. 

A Huatai executive said Beijing's Silk Road Economic Belt and 21 Century Maritime Silk Road ("Belt and Road") initiatives offer paper companies a chance to venture overseas at a time when the sector is experiencing a downturn. 

Several Chinese paper producers have embarked on overseas expansion but have encountered challenges related to cultural differences, language barriers, and unfamiliar policies, the newspaper said. 

 

 

Eying Vietnam's vast forest resources, Nine Dragons Paper, the leading linerboard manufacturer in China, in 2008 acquired a holding company that held a 60% stake in a paper factory in Vietnam. The Chinese company's plan to expand the production lines at the Vietnam factory was delayed until 2013 due to the global financial crisis and was further hampered in 2014 by anti-Chinese riots in the Southeast Asian country over oil resources in the disputed South China Sea. 

Another Shandong-based company, Sun Paper, has seen slow progress in its $200 million investment in Laos, where the company is planning to create a full production line from wood to pulp to paper. Sun Paper has planted 100,000 hectares of trees for pulp production but has encountered challenges such as poor support at the local government level and delays on a port project in Vietnam that is key to the company's transportation of its end products. 

The Belt and Road initiatives will offer support and protection to Chinese companies that are self-reliant in their overseas expansion efforts, the newspaper said. 

Nine Dragons Paper chairwoman Cheung Yan said the Chinese government needs to publicize more details about the Silk Road initiatives for the benefit of the companies and to organize overseas trips to help the enterprises gain a better understanding of the investment environment abroad. 

Meanwhile, a Huatai executive said Chinese companies, which often start or enter price competition in overseas markets, should team up to better protect their interests.