02/06/2013 12:38 pm ET Updated Apr 08, 2013

On Paper, China Looks Very Good

Without much fanfare, and without many people even aware of it, in 2009, China overtook the U.S. as the world's leading papermaker. Moreover, they did it in much the same way they became the world's premiere manufacturing beast: with innovative engineering, a smart game plan, a vast reservoir of cheap labor, and massive government subsidies.

As for reaching the top of the papermaking ladder, it's the innovative engineering aspect that stands out. China has managed to develop a genetically altered hardwood eucalyptus tree (which begins in the lab as a tissue sample in a petri dish) that requires only four to six years to reach full height. That's approximately one-tenth the time it takes "natural" trees in North America (which are abundant) to reach maturity. Eucalyptus is a favored furnish in papermaking because of its soft fiber.

Each year Chinese labs clone 190 million of these "test-tube" eucalyptus sprigs, which are planted on 790,000 acres spread over several Chinese provinces. Wending Huang, Asia Pulp & Paper's chief forester in China calls these bad boys "Yao Mings" (referring to a famous and very tall Chinese basketball player). Wisconsin is the leading papermaking state in the U.S. Maine is second. China can now match the yearly output of Wisconsin in just three weeks.

But genetically engineered trees aren't the whole story. In addition to new woodlands, China has established itself as the world's leading recycler of paper. Indeed, its recycling, de-inking, re-pulping operation is staggering. China buys about 54 billion pounds a year of scrap paper and cardboard from all over the world, and uses this recycled material to produce about two-thirds of its own paper and cardboard.

As for its own paper production, according to the McClatchy News Service, China has 20 mega-sized paper mills spread across the country, and the automated machines in these state-of-the-art mills are capable of producing a mile of glossy publishing-grade paper per minute. A mile a minute. That's 5,280 feet per minute (fpm) of a glossy, high-quality base sheet. That's amazing.

Not to give away any trade secrets here, but Machine #1 at Kimberly-Clark's Fullerton, California, paper mill produces a 172-inch wide sheet, at 4,600 fpm. That's a pretty decent operating speed for a less-than-new machine that runs 24 hours a day, 360 days a year. But this wadding is used exclusively for Kleenex and bath tissue, and doesn't approach the quality of publishing-grade paper. A high-quality, glossy base sheet is a whole other deal.

China still imports the overwhelming majority of its raw timber and processed (chemically treated) pulp. It gets it from all over the world (e.g., Indonesia, Russia, Vietnam, Brazil). In 2011 alone, it imported 14.5 million tons (29 billion pounds), l.6 million tons of which came from the U.S., where sawmills, logging and pulp operations have closed down, leaving timber businesses looking for new customers.

While environmental groups have strongly objected to China's outsized need for wood pulp, claiming that it's destroying the world's forests, American companies and Wisconsin politicians have their own reasons to complain. They accuse the Chinese government of unfairly subsidizing the country's paper mills and "dumping" unfairly priced (too cheap to compete with) paper on the American market. Japan was accused of the same practice with its cars.

According to McClatchey News Service, "the Washington-based Economic Policy Institute estimates the Chinese government doled out at least $33 billion in subsidies to its paper industry from 2002 to 2009 -- the period that coincides with its stunning growth. That's more than $4 billion a year, a number that is growing."

So U.S. paper mills are being squeezed out not only by foreign competitors but by foreign governments subsidizing those competitors. It must be nice having the government as your partner and benefactor. One of the obvious advantages is that the government can print all the money it wants. That can be very helpful to a new business.

The third part of this trio of U.S. complaints -- along with the environment and unfair dumping -- is complaints against labor unions. They blame unions for requesting a middle-class wage. Attacking working people should come as no surprise. It's Newton's First Law of Fecal Gravitation on an Inclined Plane: Shit rolls downhill.

David Macaray, a Los Angeles playwright and author ("It's Never Been Easy: Essays on Modern Labor," 2nd edition), was a former labor union rep. He can be reached at