By Sandy Lu, Economist, Graphic Papers, RISI
SHANGHAI,
June 18, 2010 (RISI) -
Two types of government policies in China could have important impacts on the Chinese pulp and paper industry: capacity closures and tax rebates.
Capacity closures accelerate industry consolidation; pave the way for the new capacity in China.
In 2006-2009, the Chinese government shut hundreds of non-wood pulp and paper plants to reduce pollution and modernize the industry, closing an estimated 6 million tonnes of total capacity. Of those 6 million tonnes, approximately 2.4 million tonnes were printing and writing paper capacity.
In May 2010, authorities announced plans to close 4.32 million tonnes of paper and board and non-wood pulp capacity by the fourth quarter of this year, a huge increase from the original goal of 530,000 tonnes set out just a couple of months ago.
China's recent announced policy will help to shut down polluting mills in China. More importantly, this policy will help industry consolidation and pave the way for the new capacity in China. It is important to note that 5.6 million tonnes of new printing and writing paper will come online in China in 2010 and 2011, but China's domestic market will not grow fast enough to absorb the growth in production from the new capacities in the next few years. Thus, one way to lessen imbalance and foster better operating rates for the new machines is to eliminate old capacity from the market and China's recently announced policy will help to do this.
Another mechanism to help to balance the market (after the new machines are installed) is exports, and Chinese government policy can also have big influence here.
Tax rebate policy on imported material affects China's paper exports.
The April 26, 2007, Announcement No. 17 from the Ministry of Commerce, General Administration of Custom and State Environmental Protection Administration lifted the ban on the processed trade of paper using imported pulp as raw material, which had been enforced since January 1, 2006. Numerous traders and pulp agents in China believed that the move was in response to the US Department of Commerce's decision on March 30, 2007, to impose provisional countervailing duties on coated woodfree paper imports from China.
Sandy Lu, RISI Asian Graphic Paper Economist, and co-author of the monthly Asian Pulp and Paper Monitor, works out of RISI's Shanghai, China, office. Tel: +86 21 687.5 8176, Email: slu@risi.com
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