China's paper industry is recovering on the back of demand from domestic consumers and the industrial sector, said an economist at a government think tank yesterday.

Production had increased 2.1 percent in the January-April period from a year earlier and was showing significant improvement month on month, said Fan Jianping, chief economist of the State Information Center.

"First quarter may be the bottom in terms of profitability for domestic paper makers," Fan told an industry forum in Suzhou, adding the export front will remain dull.

Zhao Wei, secretary general of the China Paper Association, said, despite the small recovery, the industry was still fragile and investment confidence in the sector will remain weak this year and even next.

Paper has been hit badly by the economic downturn as it serves a range of consumer and industrial manufacturing industries.

Domestic demand

China's paper and pasteboard consumption rose just 8.9 percent to 79.35 million tons in 2008, ending many years of double-digit growth, according to the paper association. Fan expected domestic demand to rise 6.6 percent this year and 7.6 percent in 2010, assuming an economic growth of 7.8 percent and 8 percent.

Meanwhile, Wu Seng Fong, president of Gold East Paper (Jiangsu) Co, an affiliate of Indonesia's Asia Pulp & Paper, said Gold East has won approval from the State Environment Protection Administration for its proposed initial public offering of domestic A shares.

Wu said the IPO may happen at the end of the year at the earliest but that would be determined by market conditions.

In China, the pulp and paper industry has the highest chemical oxygen demand, a measure of water pollution, because of many old and small operators.

China is accelerating technological improvements and closing obsolete capacity to conserve energy and protect the environment.

A rejuvenation plan for light industries, which include paper, was also approved this year to revive growth.

Gold East has invested 1.15 billion yuan, or 5 percent of the company's total investment, in environmental protection efforts, Wu said.

(Shanghai Daily June 19, 2009)