267 International Forestry Review Vol. 6(3-4), 2004 China’s development of a plantation-based wood pulp industry: government policies, financial incentives, and investment trends1 C. BARR and C. COSSALTER Senior Policy Scientist, Forests and Governance Programme, CIFOR, Jalan CIFOR, Situ Gede, Sindangbarang, Bogor Barat 16680, Indonesia Senior Plantation Scientist, Forests and Environmental Services Programme, Jalan CIFOR, Situ Gede, Sindang- barang, Bogor Barat 16680, Indonesia Email:
[email protected] and
[email protected] SUMMARY The Chinese government is aggressively promoting development of a domestic wood pulp industry, integrated with a plan- tation-based fiber supply and downstream paper production. It is doing so by providing discounted loans from state banks, fiscal incentives, and capital subsidies for establishment of at least 5.8 million hectares of fast-growing pulpwood planta- tions. This article examines the development of bleached hardwood kraft pulp (BHKP) mills in South China, including the Asia Pulp & Paper (APP) Jinhai mill in Hainan Province and the proposed Fuxing pulp mill project in Guangdong Province. Both mills face fiber shortfalls over the medium term, and significant new investments in plantation development will be needed to provide a sustainable fiber supply at the mills? projected capacity levels. However, there are few sites in south- ern coastal China where fiber can be grown at internationally competitive costs. In most instances, the cost of Chinese plan- tation pulpwood will be considerably higher than in countries like Indonesia and Brazil, raising important questions about the economic competitiveness of Chinese pulp producers even within their home market. Keywords: China; wood pulp, plantations, Asia Pulp & Paper, Fuxing INTRODUCTION tic producers modernize their operations and as in- ternational producers seek to capture a share of Chi- During the last 15 years, China has emerged as a lea- na’s growing market (He and Barr, in this issue).