Paper industry responds to tariffs

According to the statistics provided by the China Paper Association, among the 11 papermaking companies with sales revenue exceeding RMB 1 billion in 2001, foreign-funded enterprises have taken absolute advantage. They have occupied 6 seats in the top 8 positions. Of the paper-making enterprises with an annual sales income of 5 million yuan or more, the number of foreign-funded enterprises only accounted for 8.7%, but the total sales revenue and profits and taxes of products reached 30.3% and 31.1%, respectively.
While the foreign-funded enterprises that have entered the early stage have established an advantage in the papermaking industry in China, large-scale domestic enterprises are also rapidly emerging and take the road of large-scale internationalization, which is becoming a new development trend of China's pulp and paper companies. Prepare for a rainy day and respond to tariff cuts.
In recent years, newsprint consumption in China has maintained a large increase. With the strong support of the national policy, China has attracted a large number of representative large-scale projects such as Shanghai Hansong Potential Paper Co., Ltd., which has attracted foreign investment and its technology has been completed and put into production. Shandong Huatai Group has 160,000 tons/year. The newsprint production line is currently preparing to invest again in the production of a 200,000-ton production line. In July 2000, the Fujian Nan-paper high-speed newsprint printing paper production line was completed and put into operation, marking that Nanzhi has successfully completed product upgrading. At present, the company's annual newsprint production capacity is 300,000 tons, and its domestic market share is about 20%.
In the course of the construction of large-scale foreign-funded projects, China's major paper-making provinces have also formulated plans for accelerating the development of newsprint. Jiangsu Province will support the construction of a number of large-scale color offset newsprint paper projects using waste paper production. The planned production capacity in 2005, 2010 and 2020 will reach 200,000 tons, 300,000 tons and 500,000 tons, respectively. Shandong will develop products using waste paper and commercial pulp as raw materials, and newsprint will develop in large quantities and high-grade. During the 10th Five-Year Plan period in Sichuan, it is planned to establish three 200,000-ton/year conglomerates and one 400,000-ton/year conglomerate, and use high-grade color printing newsprint as one of the main products.
This year China canceled the original sliding tax on newsprint. The new tariff is 12%, and the final tariff rate imposed since January 1, 2006 is 5%. Compared with other paper products, newsprint has a longer period of tariff concessions and is obviously protected by the state. Not only that, in the new Catalogue for the Guidance of Foreign Investment Industries, newsprint also belongs to restricted foreign investment projects. This will provide China with sufficient time and space for high-end newsprint to reach the international advanced level. The localization of kraft paperboard has accelerated the substitution of imports.
As the enterprises that produce packaging paperboards are generally optimistic about the added value and the large quantity of kraftliner projects, the increase in the output of this product in China has greatly exceeded the increase in consumption. The contradiction between supply and demand has been rapidly slowed down, and more and more Domestic kraft boxboard is accelerating the replacement of similar imported products.
According to statistics, the supply and demand gap of kraftliner decreased from 1.11 million tons in the previous year to 860,000 tons in 2001. Industry insiders predict that with the entry of a large number of foreign-funded enterprises and the continuous growth of China’s foreign trade, the domestic carton packaging industry will grow at a rate of 15%-20% per year. It is expected that the annual consumption of kraft board will reach 4.2 million tons in 2005.
It is precisely for this market that China's major papermaking provinces are actively supporting the development of kraft linerboard. In 2001, the production capacity of kraft linerboard in Shandong Province has reached 470,000 tons; Jiangsu Province plans to support the construction of a number of large-scale linerboard paper projects using waste paper as raw materials, which will increase its production capacity to 40 in 2005 and 2010 respectively. Ten thousand tons and 600,000 tons. On the one hand, Zhejiang Province restricts and prohibits the production of some low-grade boxboards, and at the same time encourages the development of low-quantity, high-strength kraft linerboards and gives them preferential tax policies. In Fujian, Qingshan Paper's high-strength kraft linerboard projects are included in the budget. The National Specialized Funding Project for Internal Special Funds has been planned. The annual production of 150,000 tons of high-strength kraft paperboard and high-strength kraft liner board project invested by Qingshan with a total investment of 500 million yuan has also been put into operation.
Tsing Shan Forest Farm in Fujian Taiping, which is established by Qing Paper Investment Holdings, is expected to build 1.6 million mu (10.7 million hectares) of raw material forest base during the “10th Five-Year Plan” period, making it the first papermaking company in China to hold forestry business. In the future, due to the effect of tariff reduction, the import volume of kraftliner may show a certain rebound, which in turn aggravates the merger and reorganization of related domestic companies and creates more ways for foreign investment to enter. The tax rate for natural kraft paperboard this year has been reduced from 10% to 9.8%. The concession rate is limited, but the final tariff rate imposed on January 1, 2004 is only 2%. This will force domestic companies to reduce costs and eliminate outdated production capacity in a relatively short period of time. At the same time, they will also provide more “shell” resources for powerful foreign companies.