4.2 Follow-up development of most enterprises Follow-up development refers to the follow-up of changes in the consumer demand of the paper product market. For ordinary paper-making enterprises, we must focus on the upgrading of medium-to-high-end products in the large number of medium and low-end products in the consumer market, and make enterprises enter the value inflow period through technical transformation, increasing the proportion of wood pulp, and deep processing.
China lacks forest resources, but non-wood fiber resources such as reeds, rice straw and bagasse are abundant. At present, China's wood pulp raw materials account for 17% of papermaking raw materials, waste pulp raw materials account for 41%, and straw pulp raw materials account for about 42%. As foreign products are mainly wood pulp, imported paper is mainly wood pulp-based high-grade paper. In the middle and low-end market, domestic products are still the main products. This type of paper, which is mainly made of straw pulp and supplemented with a small amount of wood pulp, is of good quality, can meet general writing and printing requirements, and its prices are highly competitive. force. Therefore, domestic companies should firmly occupy this market, which is the root of most companies' survival.
4.3 Development of market segments with high-end, small-paper grades The leap-forward development and follow-up development is designed for enterprises to produce products with large market capacity, such as coated paper with an annual consumption of 1.8 million tons and annual consumption of 3 million tons. Coated white paperboard. For some specialty papers, due to their relatively small market capacity, the total profitability of the project is small, so foreign companies generally do not invest and build factories in China alone. For this type of high-end small paper, the total investment of the project is relatively small, and the ship is relatively small. Once the market changes, it can be withdrawn quickly, and the production of other varieties is changed. The risk is small, so companies with certain strengths can try to get involved. This market segment.
5 Organization of resources The current focus of the papermaking industry in China is to address two major obstacles to the development of the industry - the shortage of wood fiber resources and project construction funds.
5.1 Construction of artificial fast-growing forests to solve the shortage of wood fiber resources In recent years, the rise of fast-growing and high-yield forests has provided solutions for the rapid development of forestry resources. There are two kinds of forestry resources, one is ecological forest and the other is industrial forest. Industrial forests can be planted with fast growing forests. However, due to the strong planning of the use of forestry resources by the State, there are limit indicators for forest harvesting, and higher taxes and fees for forestry, making the development of industrial forests slower.
In order to support the construction of artificial fast-growing and high-yield forests and to protect the enthusiasm of building industrial forests, the relevant government departments are considering adopting the following specific measures:
(l) Separate logging indicators for industrial forests so that forest growers can cut trees for papermaking in time after maturity. This will promote the enthusiasm of paper-making enterprises in establishing artificial forests and truly realize the “forest-paper combinationâ€.
(2) To reduce the burden of taxes on the construction of industrial forests and to mobilize the enthusiasm of forest cultivation in all sectors.
The country has already implemented a pilot project in Anhui Province to reduce an 8.8% tax on artificial afforestation. At the same time, it has also streamlined township and township institutions and reduced the burden on farmers. These measures have reduced the cost of wood raw materials for papermaking companies by a factor of four, greatly increasing the market competitiveness of papermaking companies.
This shows that as long as the national policies are appropriate, the supply of wood fiber resources will continue to increase under the influence of market economic laws. According to this trend, it will take 10 to 15 years or so to change the situation of the shortage of wood fiber resources for papermaking in China.
5.2 The lack of funds through project financing to address the shortage of construction funds is the biggest problem that has plagued China's paper industry. We should carefully study the construction of China's paper industry and look for sources of funds that can support the development of the industry.
5.2.1 Lessons learned from past project construction It is precisely because the paper industry occupies an important position in the national economy. The state supports the pulp and paper industry as a key industry for structural adjustment. During the “Ninth Five-Year Plan†period, the state arranged 51 projects for domestic papermaking enterprises, with a total investment of 21 billion yuan. Now it has actually completed nearly 10 billion yuan. These investments are far from meeting the needs of industry development, and many problems have also arisen during the specific operation of project construction.
Because the pulp and paper industry has a large degree of correlation, involves a wide range of industries, and invests heavily, during the past few decades, the main project construction of the paper industry is the government to approve and arrange funds. The funds are allocated by the state and recommended by the state. For financial institutions, then financial institutions lend to companies. This mechanism seems to be scientific, but due to the lack of market awareness, it has not grasped the laws of the industry development, resulting in unsatisfactory investment results in many projects and causing great losses to the country.
There are two reasons for this adverse effect:
First of all, the government's lack of focus on corporate support, limited funds are used, and the scale of the project is not economical. The government has done some work in supporting key enterprises to scale development. However, as domestic enterprises are contending for projects, the country’s supporting policy is “sunshine†and lacks focus, resulting in the industry not being able to compete with large foreign companies in terms of scale and quality. Leading company.
Followed by the company's "moral risk." The papermaking industry has always been a highly numerated industry, and the market awareness of enterprises is insufficient. In order to obtain government support and bank loans, some companies took a irresponsible attitude in the planning of the project and made the feasibility study report of the project a “grantability†research report, exaggerating profitability and driving down the project budget. When the project was implemented, the capital was not implemented, local matching funds were not in place, and the over-estimation was serious. The liquidity was not implemented, which affected the normal operation of the company. Many projects have become "fishing projects". The project cannot be completed on time and it will miss market opportunities. The enterprise’s profit is poor and it cannot be repaid on schedule. The result can only be “debt-equity swapâ€.
Past experience and lessons call for new investment methods: it is necessary to comply with the law of the development of the industry, so that the scale and grade of the project can be put in one step, and the recovery of investment in financial institutions can be guaranteed.
The project financing strategy provides a new way to solve this problem.
5.2.2 Necessity and Possibility of Paper Industry Adopting Project Financing The traditional financing method is that the company uses its own creditworthiness to arrange financing. The decision of the external fund owner to decide whether to invest or provide loans is mainly based on the company’s overall assets, liabilities, profits, and cash flow. Project financing is a financing arranged for a specific project. When the loan is initially considered for arranging the loan, the cash flow and income of the project are used as the fund source for repaying the loan, and the asset of the project is used as the security guarantee for the loan. If the economic strength of the project is not sufficient to guarantee the security of the loan, the lender may need the borrower to provide additional credit support to the project in the form of direct guarantees or indirect guarantees. The biggest feature of project financing is project-oriented, and the biggest role is to finance large-scale projects that exceed the investors’ ability to raise funds.
The basic modules of project financing include the following aspects:
——Project investment structure: The ownership structure of the project assets, that is, the investor’s legal ownership of project rights;
——Project financing structure: financing methods and their combinations. Commonly used financing methods include direct investor financing, financing through project companies, financing through the use of facility use agreements, production loans, leveraged leasing, and BOT;
——Project funding structure: the form, proportion, and source of equity funds, quasi-equity funds, and debt funds;
- The project's credit guarantee structure.
The huge amount of capital required for papermaking projects exceeds the company's own financing capacity, so it is suitable for project financing. The characteristics of the paper industry require that the project has economies of scale, but this requires huge amounts of money, such as UPM; in Changshu, China, an annual output of 350,000 tons of paper mills, invests 600 million U.S. dollars, or about 5 billion yuan. Even the papermaking projects of domestic companies supported by the state currently require 1.5 billion yuan. For such a large project, even if the bank gives a loan, it needs a large amount of funds to support the company itself. It is difficult to raise funds. In order to ensure the safety of loans, the banking institutions also require the companies to provide guarantees. These problems often delay the project and delay development opportunities.
Papermaking projects have a long profit cycle, have good value preservation, and have little risk in implementing project financing. Whether the project's own cash flow and profitability are suitable for project financing. The characteristics of a papermaking project are its long profit cycle, stable technology, high equipment value, low probability of intangible loss, and long product life cycle. Therefore, project assets are collateralized, risk is small, and financing security is guaranteed.
5.2.3 Fundamentals of Project Financing for the Paper Industry – Investment Structure of the Project: Adopting a company-type joint venture structure Due to the economies of scale of the paper industry, a single species in the industry is only suitable for building one or two large projects. The funder of the company-type structure can be dominated by the most powerful companies in the industry in terms of production of this type of products. The rest of the companies with certain production strengths and product markets can join, and state capital can also enter and jointly establish investment entities.
——Financing model of the project: Use a financing model based on “production paymentâ€. That is to say, the equipment of the project is used as the mortgage, and the sales revenue of the products produced is taken as the source of the funds recovered by the loan bank. The products of the paper industry have the characteristics of long life cycle and stable market sales. Therefore, this kind of financing model is suitable.
——Credit guarantee structure of the project: Arrangements for limited recourse on part of the assets of the funders involved in the formation of the project company. Since the funders are key enterprises in the industry, they all have certain economic strength and certain market sales. Channels, therefore, under the joint efforts of these companies undertaking certain recourse responsibilities, the project can be run well and the repayment of bank loans can be guaranteed.
5.2.4 Project Financing Effect Prediction If the paper industry uses project financing as a means of corporate construction, it can produce the following effects:
——Strictly extruding high-grade paper products that meet the needs of the society, replacing imports, saving the country a lot of foreign exchange;
——Rapidly improve the international competitiveness of the industry, greatly increase the profitability of the industry, and stimulate the development of related industries such as culture and packaging;
——Promote key papermaking companies to form groups led by large-scale projects and increase the degree of intensiveness of the industry.
Taking the project as a leader, establishing a large paper group through mergers and acquisitions and other means in the same geographical area or between companies of the same type of paper, thereby realizing economies of scale and improving overall competitiveness, is a strategic requirement for China's paper industry to cope with international competition.
In short, project financing is an effective way to solve the shortage of funds in China's paper industry and is a major measure for China's paper industry to achieve a leap-forward development model.
5.3 Use of foreign capital to develop China's paper industry Even if large-scale artificial afforestation is started and project financing strategies are implemented, the development of China's pulp and paper industry needs a medium-to-long-term time. However, the immediate problem of the shortage of domestic high-grade paper is that it cannot wait for the development of domestic companies before resolving it. Therefore, in the short term, we must adopt other strategies to promote the development of China's paper industry. Although foreign-funded enterprises have caused a certain impact on the domestic market, if the country's investment capacity is limited, foreign capital must be used to meet China's paper demand. The entry of foreign capital will be beneficial to alleviating the contradiction between the accelerated development of China's paper industry and the shortage of capital, spurring the progress of domestic enterprises in management and technology, and accelerating the modernization process of China's paper industry. Therefore, the industry must not only support "made by China" (MADE BYCHINA), but also support "made in China" (MADE IN CHINA). "Manufactured by China" refers to production by China's own companies, including both domestically and abroad), while "Made in China" includes not only Chinese companies but also those of foreign-owned enterprises in China. Since the tax revenues of enterprises in China are all handed over to the Chinese government, they can provide employment opportunities for the society. Therefore, for enterprises that are “made in Chinaâ€, the state should also support it.
The products of foreign-invested companies that are “made in China†are a balancing force that prevents the high-end paper products market from being manipulated by foreign companies. At the same time, it can reduce the country’s import dependence on paper and save foreign exchange. Taking the import of paper in 2000 as an example, due to the fact that in 2000, several wholly foreign-owned enterprises producing high-grade paper went on track, the country imported
China lacks forest resources, but non-wood fiber resources such as reeds, rice straw and bagasse are abundant. At present, China's wood pulp raw materials account for 17% of papermaking raw materials, waste pulp raw materials account for 41%, and straw pulp raw materials account for about 42%. As foreign products are mainly wood pulp, imported paper is mainly wood pulp-based high-grade paper. In the middle and low-end market, domestic products are still the main products. This type of paper, which is mainly made of straw pulp and supplemented with a small amount of wood pulp, is of good quality, can meet general writing and printing requirements, and its prices are highly competitive. force. Therefore, domestic companies should firmly occupy this market, which is the root of most companies' survival.
4.3 Development of market segments with high-end, small-paper grades The leap-forward development and follow-up development is designed for enterprises to produce products with large market capacity, such as coated paper with an annual consumption of 1.8 million tons and annual consumption of 3 million tons. Coated white paperboard. For some specialty papers, due to their relatively small market capacity, the total profitability of the project is small, so foreign companies generally do not invest and build factories in China alone. For this type of high-end small paper, the total investment of the project is relatively small, and the ship is relatively small. Once the market changes, it can be withdrawn quickly, and the production of other varieties is changed. The risk is small, so companies with certain strengths can try to get involved. This market segment.
5 Organization of resources The current focus of the papermaking industry in China is to address two major obstacles to the development of the industry - the shortage of wood fiber resources and project construction funds.
5.1 Construction of artificial fast-growing forests to solve the shortage of wood fiber resources In recent years, the rise of fast-growing and high-yield forests has provided solutions for the rapid development of forestry resources. There are two kinds of forestry resources, one is ecological forest and the other is industrial forest. Industrial forests can be planted with fast growing forests. However, due to the strong planning of the use of forestry resources by the State, there are limit indicators for forest harvesting, and higher taxes and fees for forestry, making the development of industrial forests slower.
In order to support the construction of artificial fast-growing and high-yield forests and to protect the enthusiasm of building industrial forests, the relevant government departments are considering adopting the following specific measures:
(l) Separate logging indicators for industrial forests so that forest growers can cut trees for papermaking in time after maturity. This will promote the enthusiasm of paper-making enterprises in establishing artificial forests and truly realize the “forest-paper combinationâ€.
(2) To reduce the burden of taxes on the construction of industrial forests and to mobilize the enthusiasm of forest cultivation in all sectors.
The country has already implemented a pilot project in Anhui Province to reduce an 8.8% tax on artificial afforestation. At the same time, it has also streamlined township and township institutions and reduced the burden on farmers. These measures have reduced the cost of wood raw materials for papermaking companies by a factor of four, greatly increasing the market competitiveness of papermaking companies.
This shows that as long as the national policies are appropriate, the supply of wood fiber resources will continue to increase under the influence of market economic laws. According to this trend, it will take 10 to 15 years or so to change the situation of the shortage of wood fiber resources for papermaking in China.
5.2 The lack of funds through project financing to address the shortage of construction funds is the biggest problem that has plagued China's paper industry. We should carefully study the construction of China's paper industry and look for sources of funds that can support the development of the industry.
5.2.1 Lessons learned from past project construction It is precisely because the paper industry occupies an important position in the national economy. The state supports the pulp and paper industry as a key industry for structural adjustment. During the “Ninth Five-Year Plan†period, the state arranged 51 projects for domestic papermaking enterprises, with a total investment of 21 billion yuan. Now it has actually completed nearly 10 billion yuan. These investments are far from meeting the needs of industry development, and many problems have also arisen during the specific operation of project construction.
Because the pulp and paper industry has a large degree of correlation, involves a wide range of industries, and invests heavily, during the past few decades, the main project construction of the paper industry is the government to approve and arrange funds. The funds are allocated by the state and recommended by the state. For financial institutions, then financial institutions lend to companies. This mechanism seems to be scientific, but due to the lack of market awareness, it has not grasped the laws of the industry development, resulting in unsatisfactory investment results in many projects and causing great losses to the country.
There are two reasons for this adverse effect:
First of all, the government's lack of focus on corporate support, limited funds are used, and the scale of the project is not economical. The government has done some work in supporting key enterprises to scale development. However, as domestic enterprises are contending for projects, the country’s supporting policy is “sunshine†and lacks focus, resulting in the industry not being able to compete with large foreign companies in terms of scale and quality. Leading company.
Followed by the company's "moral risk." The papermaking industry has always been a highly numerated industry, and the market awareness of enterprises is insufficient. In order to obtain government support and bank loans, some companies took a irresponsible attitude in the planning of the project and made the feasibility study report of the project a “grantability†research report, exaggerating profitability and driving down the project budget. When the project was implemented, the capital was not implemented, local matching funds were not in place, and the over-estimation was serious. The liquidity was not implemented, which affected the normal operation of the company. Many projects have become "fishing projects". The project cannot be completed on time and it will miss market opportunities. The enterprise’s profit is poor and it cannot be repaid on schedule. The result can only be “debt-equity swapâ€.
Past experience and lessons call for new investment methods: it is necessary to comply with the law of the development of the industry, so that the scale and grade of the project can be put in one step, and the recovery of investment in financial institutions can be guaranteed.
The project financing strategy provides a new way to solve this problem.
5.2.2 Necessity and Possibility of Paper Industry Adopting Project Financing The traditional financing method is that the company uses its own creditworthiness to arrange financing. The decision of the external fund owner to decide whether to invest or provide loans is mainly based on the company’s overall assets, liabilities, profits, and cash flow. Project financing is a financing arranged for a specific project. When the loan is initially considered for arranging the loan, the cash flow and income of the project are used as the fund source for repaying the loan, and the asset of the project is used as the security guarantee for the loan. If the economic strength of the project is not sufficient to guarantee the security of the loan, the lender may need the borrower to provide additional credit support to the project in the form of direct guarantees or indirect guarantees. The biggest feature of project financing is project-oriented, and the biggest role is to finance large-scale projects that exceed the investors’ ability to raise funds.
The basic modules of project financing include the following aspects:
——Project investment structure: The ownership structure of the project assets, that is, the investor’s legal ownership of project rights;
——Project financing structure: financing methods and their combinations. Commonly used financing methods include direct investor financing, financing through project companies, financing through the use of facility use agreements, production loans, leveraged leasing, and BOT;
——Project funding structure: the form, proportion, and source of equity funds, quasi-equity funds, and debt funds;
- The project's credit guarantee structure.
The huge amount of capital required for papermaking projects exceeds the company's own financing capacity, so it is suitable for project financing. The characteristics of the paper industry require that the project has economies of scale, but this requires huge amounts of money, such as UPM; in Changshu, China, an annual output of 350,000 tons of paper mills, invests 600 million U.S. dollars, or about 5 billion yuan. Even the papermaking projects of domestic companies supported by the state currently require 1.5 billion yuan. For such a large project, even if the bank gives a loan, it needs a large amount of funds to support the company itself. It is difficult to raise funds. In order to ensure the safety of loans, the banking institutions also require the companies to provide guarantees. These problems often delay the project and delay development opportunities.
Papermaking projects have a long profit cycle, have good value preservation, and have little risk in implementing project financing. Whether the project's own cash flow and profitability are suitable for project financing. The characteristics of a papermaking project are its long profit cycle, stable technology, high equipment value, low probability of intangible loss, and long product life cycle. Therefore, project assets are collateralized, risk is small, and financing security is guaranteed.
5.2.3 Fundamentals of Project Financing for the Paper Industry – Investment Structure of the Project: Adopting a company-type joint venture structure Due to the economies of scale of the paper industry, a single species in the industry is only suitable for building one or two large projects. The funder of the company-type structure can be dominated by the most powerful companies in the industry in terms of production of this type of products. The rest of the companies with certain production strengths and product markets can join, and state capital can also enter and jointly establish investment entities.
——Financing model of the project: Use a financing model based on “production paymentâ€. That is to say, the equipment of the project is used as the mortgage, and the sales revenue of the products produced is taken as the source of the funds recovered by the loan bank. The products of the paper industry have the characteristics of long life cycle and stable market sales. Therefore, this kind of financing model is suitable.
——Credit guarantee structure of the project: Arrangements for limited recourse on part of the assets of the funders involved in the formation of the project company. Since the funders are key enterprises in the industry, they all have certain economic strength and certain market sales. Channels, therefore, under the joint efforts of these companies undertaking certain recourse responsibilities, the project can be run well and the repayment of bank loans can be guaranteed.
5.2.4 Project Financing Effect Prediction If the paper industry uses project financing as a means of corporate construction, it can produce the following effects:
——Strictly extruding high-grade paper products that meet the needs of the society, replacing imports, saving the country a lot of foreign exchange;
——Rapidly improve the international competitiveness of the industry, greatly increase the profitability of the industry, and stimulate the development of related industries such as culture and packaging;
——Promote key papermaking companies to form groups led by large-scale projects and increase the degree of intensiveness of the industry.
Taking the project as a leader, establishing a large paper group through mergers and acquisitions and other means in the same geographical area or between companies of the same type of paper, thereby realizing economies of scale and improving overall competitiveness, is a strategic requirement for China's paper industry to cope with international competition.
In short, project financing is an effective way to solve the shortage of funds in China's paper industry and is a major measure for China's paper industry to achieve a leap-forward development model.
5.3 Use of foreign capital to develop China's paper industry Even if large-scale artificial afforestation is started and project financing strategies are implemented, the development of China's pulp and paper industry needs a medium-to-long-term time. However, the immediate problem of the shortage of domestic high-grade paper is that it cannot wait for the development of domestic companies before resolving it. Therefore, in the short term, we must adopt other strategies to promote the development of China's paper industry. Although foreign-funded enterprises have caused a certain impact on the domestic market, if the country's investment capacity is limited, foreign capital must be used to meet China's paper demand. The entry of foreign capital will be beneficial to alleviating the contradiction between the accelerated development of China's paper industry and the shortage of capital, spurring the progress of domestic enterprises in management and technology, and accelerating the modernization process of China's paper industry. Therefore, the industry must not only support "made by China" (MADE BYCHINA), but also support "made in China" (MADE IN CHINA). "Manufactured by China" refers to production by China's own companies, including both domestically and abroad), while "Made in China" includes not only Chinese companies but also those of foreign-owned enterprises in China. Since the tax revenues of enterprises in China are all handed over to the Chinese government, they can provide employment opportunities for the society. Therefore, for enterprises that are “made in Chinaâ€, the state should also support it.
The products of foreign-invested companies that are “made in China†are a balancing force that prevents the high-end paper products market from being manipulated by foreign companies. At the same time, it can reduce the country’s import dependence on paper and save foreign exchange. Taking the import of paper in 2000 as an example, due to the fact that in 2000, several wholly foreign-owned enterprises producing high-grade paper went on track, the country imported