In 2006, the growth of paper output in China decreased as a whole, easing up the contradiction between supply and demand. In 2007, such a trend will continues. In Jan-Feb of 2007, the output of machine-made paper and paper board in large-scaled paper enterprises increased by 13.3% year-on-year, lower than that at the same period and even average level of 2006. For different products, in the first two months of 2007, the output of writing & printing paper had a great fallback, down by nearly 2 points year on year. While in Jan-Feb of 2006, the figure increased by 55% year-on-year. Compared to 2006, the output growth of liner board also decreased a little, the output of liner board increased by 17% year-on-year.

Since the production capacity of Taicang Project by Jiulong Paper Co., Ltd will be released concentratively, the output growth of liner board will still keep a high level in 2007. Unlike the growth trend of overall paper output, from Jan to Feb, the output growth of newsprint paper increased by 4.5 points, enabling the output growing by 24% year-on-year. It is attributed to the releasing of over 850,000 tons by Shandong Chenming Paper Holdings Limited and Shandong Huatai Paper Co., Ltd together (450,000 tons by Huatai and 400,000 tons by Chenming).

Paper-making industry is an industry with obvious scale effects. Operation of top 10 enterprises on sales revenues in paper-making industry has the following characteristics. Firstly, gross profit margin rose. In Jan-Feb, top 10 enterprises in paper-making industry have accumulatively realized sales revenues and profits RMB 11.334 billion and RMB 938 million respectively. Sales profit rate was 8.27%, up by 0.5 points compared to 2006. Secondly, affected by scale effects, gross profit margin of top 10 enterprises exceeded the average industry level to a large extent. Gross profits margin from sales of top 10 enterprises in paper-making industry accumulatively was 7.78%, up by 2.78 points compared to the average industry level. While for Jan and Feb of 2007, gross profit margin from sales of top 10 enterprises in paper-making industry accumulatively was 8.27%, up by 3.74% compared to the average industry level. As governments attach more and more importance to environmental protection, many small high-pollution paper plants will be closed, and the industry concentration also will be higher. Obviously, paper-making industry will be a new field for capital M & A after cement, steel and commerce fields.

This report has introduced overall analysis, performance, operation and investment of 24 listed paper companies in details. Furthermore, this report has also analyzed the structure of primary business as well as latest market trends.