Massive Chinese government subsidies have given China’s paper industry an unfair competitive advantage that has helped fuel the industry’s rapid growth in recent years according to a new study from the Economic Policy Institute (EPI).
In November 2008, China’s National Bureau of Statistics (2003- 09b) reported that the paper industry’s output had increased to 83.9 million metric tons, up 9.6% from the previous year. In 2009, China produced over 17% of the world’s total output in the paper industry; with exports of $7.6 billion in paper and paperboard, China consolidated its position as a lead exporter in the industry. Since 2000, China has increased paper production three-fold to assume a leading role in the global paper industry.
The rapid rise in China’s paper industry did not result from advantages in natural resources, economies of scale or scope, new technology, or lower cost of production (including labor). Instead, the growth resulted from at least $33.1 billion in various Chinese government subsidies paid to the country’s paper industry between 2002 and 2009.
In 2010, China has by far the fastest-growing paper industry in the world. Yet, China also has among the smallest forestry resources in the world to support this industry’s expansion. Consequently, it imports the bulk of its raw materials at world prices — yet, paper in China generally sells at prices much lower than in the United States or European Union.
Globally, and in China, labor constitutes a very small part of the costs of the paper industry — high capital investments play a major role. In China, government subsidies and loans have provided strong support for the paper industry’s expansion. Combined with saturated, domestic product markets, the expansion has lead to enormous overcapacity in China and a meteoric increase in China’s paper exports.
China’s government policies give it’s industries an unfair advantage, including currency manipulation and wage suppression.