China's pulp and paper industry is the largest in the world by both production and demand. However, the country still relies on imports for certain raw materials and specialty products. As domestic industries such as e-commerce and food delivery services continue to grow, so will the need for pulp and paper products, providing considerable opportunities for market entry and investment.
China is the world’s largest producer and consumer of pulp and paper products. The country produced over 280 million tons of pulp and paper products combined and consumed over 230 million tons in 2022.
Paper and cardboard products are crucial for a wide range of industries in China, and demand is likely to continue growing as incomes increase and consumers have higher disposable earnings. The rise of industries such as e-commerce and food delivery services are increasing the need for paper and cardboard packaging. In addition, the country still relies on imports for certain products and raw materials for domestic production, such as wood pulp.
In this article, we look at the latest data on China’s pulp and paper market, including production, consumption, and trade, and discuss the key market segments and opportunities for foreign investors.
Overview of China’s pulp and paper industryAccording to the 2022 China Pulp and Paper Annual Report compiled by the China Paper Association, the total output of the pulp, paper, and paper products industry reached 283.91 million tons in 2022. This is a slight increase of 1.32 percent from 2021.
In 2022, the industry's total operating revenue was RMB 1.52 trillion (US$210.32 billion), up 0.44 percent year-on-year, but profits declined by 29.79 percent year-on-year to reach RMB 62.1 billion (US$8.59 trillion).
Supply and demand of paper and paper productsChina’s production of paper and cardboard reached 124.25 million tons in 2022, a year-on-year increase of 2.64 percent. However, the production of paper products declined by 4.65 percent year-on-year with a total of 73.79 million tons produced.
According to a survey from the China Paper Association, there were approximately 2,500 paper and cardboard production companies and 4,727 paper product manufacturers with an annual income of over RMB 20 million (US$2.77 million) in China in 2022.
In terms of demand for pulp and paper products, the consumption of paper and cardboard reached a total of 124.03 million tons, decreasing by 1.94 percent compared to the previous year. Per capita, the annual consumption of paper and cardboard was 87.84 kilograms in 2022.
Although consumption of paper and cardboard fell in 2022, the period from 2013 to 2022 saw growth in demand actually outstrip production, with production recording an average annual growth rate of 2.32 percent versus 2.67 percent for consumption. In fact, both production and consumption have remained relatively stable over the last decade, with consumption having continuously grown between 2018 and 2021.
A similar trend is observed in the paper products production industry. The industry’s total output decreased by 4.65 percent in 2022 to 73.79 million tons, while consumption also declined by 5.89 percent to 68.97 million tons. However, the industry also recorded an annual average growth rate of 3.69 percent for production and 3.45 percent from 2013 to 2022.
Supply and demand of pulpAccording to the China Paper Association, China’s total pulp production reached 85.87 million tons in 2022, an increase of 5.01 percent over the previous year. The largest sub-segment of the pulp industry was waste paper pulp, of which China produced around 59.14 million tons in 2022, an increase of 1.72 percent from the previous year. The production of wood pulp, meanwhile, reached 21.15 million tons of wood pulp, an increase of 16.92 percent year-on-year, and non-wood pulp reached 5.58 million tons, up 0.72 percent over the previous.
In terms of demand, China consumed around 112.95 million tons of pulp in 2022, an increase of 2.59 percent from the previous year. Of this, 43.28 million tons were wood pulp, accounting for 38 percent of the total pulp consumption, of which over half (52 percent) was imported.
Around 64.3 million tons of waste paper pulp was consumed in 2022, accounting for 57 percent of total pulp consumption, of which the vast majority (around 95 percent) was domestically produced.
Finally, non-wood pulp reached 5.37 million tons in 2022, accounting for 5 percent of the total pulp consumption.
Major paper and pulp product segmentsCardboard and corrugated paper, which are most commonly used for packaging, account for the largest proportions of both the production and consumption of paper products in China. This is followed by uncoated printing and writing paper, white cardboard, and tissue paper.
Recycled paperIn 2022, the total amount of recycled domestic waste paper in China was 65.85 million tons, an increase of 1.45 percent from 2021. The waste paper recovery rate reached 53.1 percent, while the utilization rate reached 53.5 percent. The recovery of waste paper has gradually increased over the last decade, growing at an average annual rate of 4.64 percent from 2013 to 2022.
Newspaper and packaging paperUnsurprisingly, given the rise of digital media, the production and consumption of paper for newspapers have decreased steadily over the last decade. The industry recorded a CAGR of -14.28 percent for production and -10.38 percent for consumption from 2013 to 2022.
Meanwhile, 7.3 million tons of packaging paper was produced in 2022, an increase of 2.1 percent over the previous year. Around the same amount was consumed—7.31 million tons—an increase of 1.25 percent from 2021. Between 2013 and 2022, the average annual growth rate of production was 1.56 percent, while consumption was 1.31 percent.
Molded pulpChina is home to a large and growing molded pulp industry, with the country accounting for around 40.5 percent of the world’s production capacity.
Molded pulp is a lightweight material made from recycled plant fibers. It is most commonly used as protective packaging in industrial and medical settings but may be best recognized for its use in the food industry, where it is found as disposable tableware (such as food trays and beverage holders), egg trays, and more.
In the food industry in particular, the material is rising in popularity due to its use as a more sustainable substitute for plastic. This uptake will continue to rise as companies and governments seek to reduce their environmental impact. At the same time, the rise in food delivery services and takeout is also increasing demand for the material, thanks to its lightweight, protective, and disposable properties, as well as low cost.
According to estimates from the Qianzhan Industry Research Institute, China's pulp molding production capacity was around 1.79 million tons in 2022, approximately 40.5 percent of the 4.42 million ton global production capacity. Meanwhile, China’s molded pulp output in 2022 reached 1.57 million tons.
The largest segment of molded pulp products is ordinary protective packaging, which accounts for around 64 percent of China’s molded pulp production in 2022, standing at around 1.01 million tons.
The most common product after this is disposable tableware. In 2022, China produced a total production of 440,000 tons of this product, accounting for around 28 percent of China’s total molded pulp production.
Finally, China’s production of high-quality industrial packaging made from molded pulp was relatively small at around 120,000 tons, accounting for 8 percent of the total.
Imports and exports of paper and pulpChina is both a major importer and exporter of pulp and paper.
In 2022, imports of almost all types of pulp and paper products declined, corresponding to an overall drop in imports that year as a result of severe COVID-19 outbreaks and subsequent restrictions. Total imports of paper, cardboard, pulp, waste paper, and paper products in 2022 reached 38.73 million tons, a decrease of 8.31 percent compared to the previous year. However, the value of these imports increased slightly by 0.82 percent, reaching US$29.89 billion.
A total of 8.36 million tons of paper and cardboard were imported in 2022, down 23.3 percent from the previous year. Meanwhile, 29.64 million tons of pulp (22.37 million tons excluding non-paper and non-wood pulp) was imported, a decline of 2.88 percent compared to the previous year.Waste paper was one of the few sectors that saw an increase in imports, growing 5.56 percent year-on-year to reach a total of 570,000 tons. Meanwhile, paper product imports declined by 42.86 percent to 160,000 tons.
The average import price of paper and cardboard in 2022 was US$732.69 per ton, an increase of 5.35 percent compared to the previous year, while the average import price of pulp was US$766.35 per ton, an increase of 13.45 percent.
Waste paper cost an average of US$237.82 per ton, declining 3.43 percent compared to the previous year.
On the other hand, exports in 2022 for the most part saw a huge jump, with total exports of paper, cardboard, pulp, waste paper, and paper products growing 38.2 percent year-on-year to reach 13.8271 million tons. The value of these exports also increased by 30.6 percent, earning a total of US$34.65 billion.
Of China’s pulp and paper exports in 2022:
- Exports of paper and cardboard reached 8.58 million tons, an increase of 56.86 percent year-on-year;
- Exports of pulp reached 266,800 tons, an increase of 73.02 percent year-on-year;
- Export of waste paper reached 300 tons, a decrease of 75 percent compared to the previous year; and
- Exports of paper products reached 4.98 million tons, an increase of 13.7 percent compared to the previous year.
China's pulp and paper industry policies
Encouraged industriesChina does not place any additional restrictions on foreign investment in the pulp and paper industry and even encourages investment in certain sectors.
China’s Catalogue of Encouraged Industries for Foreign Investment (2022 Version), which came into force on January 1, 2023, outlines several sub-sectors encouraged for foreign investment, including (but not limited to):
- Manufacturing of heavy corrugated cardboard and carton equipment;
- Manufacturing of light corrugated cardboard and carton equipment with a flute height of 0.75 mm or less;
- Paper chemicals;
- Manufacture of new papermaking machinery (including pulp) and other complete sets of equipment; and
- Reuse of waste paper.
- Tariff exemptions on imported equipment: For encouraged foreign-invested projects, the import of equipment for the project’s own use within the total amount of investment can be exempted from customs duties, with certain exceptions;
- Access to preferential land prices and looser regulation of land use: Land can be preferentially supplied for encouraged foreign-funded projects for the purpose of intensive use. The land transfer reserve price can be determined at 70 percent of the national minimum price for the transfer of industrial land.
- Lowered corporate income tax (CIT): FIEs engaged in encouraged industries operating in certain areas in China, including the western regions and Hainan province, which meet certain requirements, can enjoy a reduced CIT rate of 15 percent.
Lowered import taxes on some paper productsAt the end of December 2022, the Customs Tariff Commission of the State Council announced a series of adjustments to import taxes for a range of products starting in 2023.
This includes a temporary reduction to import taxes that are set below the most-favored-nation (MFN) level for dozens of pulp and paper products. The lowered import taxes on some of the products are summarized in the table below.
|Import Taxes Below MFN Level for Pulp and Paper Products in 2023 (Sample)|
|Product||2023 MFN rate||2023 temporarily reduced rate|
|Other hand-made paper and cardboard||6%||5%|
|photographic base paper||6%||0%|
|Photosensitive, heat-sensitive, and electro-sensitive paper other than photographic base paper, base paper, and cardboard||6%||0%|
|Wallpaper base paper||6%||0%|
|Other uncoated paper and cardboard for writing, printing, or similar purposes, weighing less than 40 g/m2, not containing fibers obtained by mechanical or chemi-mechanical processes or no more than 10% by weight of the total fibers||6%||0%|
|Semi-chemical corrugated base paper in rolls or sheets, straw pulp corrugated base paper in rolls or sheets, and other corrugated base paper in rolls or sheets||6%||0%|
|Clothing and clothing accessories of pulp, paper, cellulose wadding, or web of cellulose fibers||5%||0%|
|Various types of boxes of corrugated paper or cardboard||5%||0%|
|Labels of all kinds printed on paper or cardboard||6%||0%|
|Pressed or molded pulp products||6%||5%|
|Note: The above list is not exhaustive.|
Prospects and opportunities in China’s pulp and paper industryAlthough the use of paper and pulp has decreased in traditional settings, most notably in areas that have digitized, such as communications, media, and documentation, other recent phenomena have helped to offset this decline.
For instance, the fast rise of e-commerce and delivery services has increased demand for corrugated paper and cardboard. Food delivery is a booming industry in China, and as consumers and companies increasingly worry about environmental impact, the demand for plastic alternatives will continue to rise.
For the same reason, recycling and waste management also present considerable potential, as the country looks to develop a circular economy. The 14th Five Year Plan for the Development of the Circular Economy, for instance, aims to increase waste paper utilization to 60 million tons by 2025.
Companies may also be able to tap into the high-quality specialty paper market, which continues to show considerable potential as the consumption of mid-to-high-end products grows. Quality packaging, in particular for high-end luxury items, is highly prized by Chinese consumers, and cultural proclivity for gift-giving further expands the need for specialty paper production.
Although China dominates the production of certain types of pulp and paper products, it remains reliant on imports for certain products, in particular raw materials such as wood pulp. Foreign producers that are not already selling in China may therefore wish to explore trade opportunities.
Finally, China is also an ideal location for sourcing suppliers for pulp and paper products. Given the country’s dominance in certain sub-sectors, in particular manufactured paper products, such as coated paper, tissue paper, white cardboard, and specialty paper and cardboard.