China's Paper Industry to Be Profitable in 2008

Dec. 27, 2007 - At the end of September, China's paper industry generated sales of RMB33.339 billion (approx. USD 4.5 billion), up by 18.74% over the same period in 2006, with a net profit of RMB1.784 billion (approx. USD 243.7 million), up 35.47%, according to ChinaPaper Online.

Analysts predict that China's paper sector will continue to experience good financial growth in 2008 for a number of reasons:

1. The growth of paper industry will be tied tightly to that of GDP.

2. The Chinese government has policy in place for the healthy development of its paper industry. Part of that policy is to shutdown obsolete mills. By the end of 2007, 2.3 million metric tons of “obsolete” production capacity will have been removed, and an additional 6.5 million metric tons will be eliminated according to the 11th Five Year Plan (2006-2010).

3. The continuation of trimming obsolete capacity will tighten supply, leading to higher prices for paper products as it did in 2007.

4. Since 2004, investment in capacity expansion at existing mills has slowed down, which will help keep China's growing output of paper more in balance with demand.

5. China's paper industry has benefited from RMB appreciation.

6. The 2008 Beijing Summer Olympic Games and Shanghai World Expo will drive the demand for paper.

SOURCE: ChinaPaper Online

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