Industries Ltd.; and (4) Hitachi Zosen Corporation. In the paper converting machinery sector, the top six suppliers accounted for about 24 percent of shipments in 1985. These suppliers are (1) Shibuya Kogyo Co., Ltd.; (2) Mitsubishi Heavy Industries, Ltd.; (3) Fuji Machinery Co., Ltd.; (4) Tokyo Shokuhin Kikai Co., Ltd.; (5) Omori Kikai Kogyo Co., Ltd.; and (6) Tokyo Jido Kikai Seisakusho Ltd. None of the Japanese producers maintain direct factory operations in the United States. However, Mitsubishi has been a licensee of Beloit Corporation since 1953. In November 1986, Beloit's parent company, Harnischfeger Corporation, announced it had sold a 20 percent interest in Beloit to Mitsubishi for $60 million. Coming on the heels of an apparently unsuccessful attempt by Mitsubishi to purchase Beloit when it was up for sale in early 1986, this investment marks the first major Japanese entry into the North American papermaking machinery market. In other arrangements, Sumitomo is a licensee of Valmet and Ishikawajima-Harima holds licenses from both Black Clawson and Voith.

Source: Japan Society for the Promotion of Machine Industry.

Japanese shipments of papermaking machinery and paper converting machinery rose rapidly during 1983-86 period after slow growth during the worldwide slowdown in demand for paper machinery in 1982 (Table 40).

Note: There are discrepancies between total exports and total exports of papermaking machinery and paper converting machinery by major countries because plant exports are not included in this table.

Source: Japan Society for the Promotion of Machine Industry.

Japan has maintained, as noted, a higher volume of trade in paper converting machinery than in basic pulp-making and papermaking machinery. Its leading export markets have typically been in Asia, especially South Korea, Taiwan, and Indonesia which, as yet, possess little domestic paper machine building capacity. The United States, however, has sometimes been the leading market as in 1985 for cutting, bag-making and box-making machinery and in 1983 for machinery for making or finishing paper/paperboard. U.S. trade figures, using a somewhat different base than the Japanese figures shown in Table 41, have also shown a reasonably close balance of trade. For 1985, U.S. figures show exports of papermaking and paper converting machinery to Japan exceeded imports $28 million to $24 million. However, the 1986 trade balance favored Japan by a 2-1 ratio with $58 million of imports compared to $29 million in U.S. exports. In 1987, U.S. paper machinery exports to Japan were unchanged at $29 million, while U.S. imports from Japan fell by 17 percent to $48 million.

In addition to Mitsubishi's investment in Beloit noted earlier, there are several licensing agreements between Japanese suppliers and the major international producers, primarily covering top formers. Other licensing agreements include Ishikawa-Harima-Voith, Sumitomo-Valmet, and Kobayashi Engineering Works, Ltd. with Ahlstrom (Finland), the latter agreement pertaining to headboxes.

Precise data on mill capital spending plans and R&D expenditures are not available. An industry source estimated that a medium-sized 500 employee firm spent around 200 million yen on R&D in 1985, or approximately 1.5 percent of the firm's total sales. The firm estimated that 90 percent of industry R&D expenditures could be attributed to firms of 25,000 or more employees. With respect to capital expenditures, such expenses ranged from 3 to 15 percent of turnover over the past 5-years. In general, firms specializing in paper machinery appeared to be devoting a larger percentage of capital to new capital expansion.

People's Republic of China. The People's Republic of China, the world's most populous country, ranks fourth worldwide in paper and paperboard production, manufacturing 11.4 mmt during 1987. It's pulp production, seventh worldwide, totaled 7.2 mmt. Overall per capita consumption is only 22 pounds, just over 3 percent of the 640 pounds per capita used in the United States during the same year.

Mills and machinery in China are primitive in comparison to Western standards. There are an estimated 1,600 paper and paperboard mills in China and an unknown number of pulp mills. However, few of these operations approach Western standards; recently it was estimated that 70 percent of the mills should be closed or upgraded so that each mills can produce at least 10,000 tpy of paper product. According to estimates only 30 of the paper mills were capable of producing over 30,000 tpy of paper while another 100 mills produce between 10,000 and 30,000 tpy. The remaining small, inefficient mills account for 55-60 percent of Chinese paper production. Most

mills use non-wood fibers such as bagasse, bamboo, waste paper, and straw as pulp furnish to produce low-quality printing and writing papers for local consumption.

Approximately 400 fourdrinier machines are estimated to be in operation in China. Many of these are of U.S. origin, some dating before World War II. The Chinese market for paper machinery has proved attractive in recent years to both U.S. and foreign suppliers as major machine rebuilds and greenfield mills have gone forward. Projects were recently reported under way at 7 of the country's 10 leading paper mills.

Major rebuild projects were divided among leading suppliers, especially Beloit and Voith (West Germany). Beloit Italia rebuilt the fourdrinier and press sections of a paper machine of the Qingzhou Paper Mills in Fujian Province. The expanded capacity will allow production of 300 tpd of kraft paper for bags and sacks. Another Beloit project was to rebuild a fourdrinier at the Yueyang Paper Mill in Henan Province. The mill now produces 160 mtpd of printing paper. Beloit, through Mitsubishi, its Japanese licensee, also provided a rebuilt fourdrinier at Jiamusi Pulp and Paper Mill in Heilongjiang Province, a mill which produces kraft and writing papers. In addition, Beloit has provided stock preparation equipment for the Hausheng Paper Mill in Hangzhou, Zhejiang Province. Voith has supplied a twin-wire for Paper Machine No. 5 at the Jincheng Paper Mill in Liaoning Province. Tampella (Finland) is currently supplying a $23.4 million paperboard mill to Xing Huo of Shanghai. Scheduled for delivery at the end of 1990, the project will include stock preparation equipment, four fourdriniers, calenders, sheet cutters, a sheet packaging line, and auxiliary equipment. Black Clawson recently announced the sale of three Chemi-WasherTM brownstock washers to Chinese pulp mills with application to both sulfite and soda pulps. The Chemi-WashersTM were supplied from the United Kingdom. As this and other sales indicate, purchase of U.S. nameplate equipment has not necessarily meant U.S. production of the equipment. Competitive pressures have required that foreign subsidiaries or licensees in the United Kingdom, Italy, and Japan provide the equipment. In 1984, Beloit delivered an estimated $10 million of paper machinery to China, largely from its European subsidiaries. In contrast, total U.S. dimestic exports of paper machinery to China totaled only $842,000 in 1982 rising to $4.3 million in 1988.

Beloit, as the market leader in China, has also entered into a joint venture with the Ministry of Light Industry to produce rubber roll coverings. Known as Xi-Be Roll Covering Company, the firm is located in Xian, Shanxi Province.

Rubber roll coverings are used on paper machine rolls. If successful, the joint venture may be expanded to include production of other types of paper machinery. 2

2

See Pulp and Paper, August 1988, pp. 48-57.

For a summation of the condition of the Chinese paper industry and of the major projects being undertaken to upgrade Chinese paper machinery, see Seto, May and Sensenbenner, Julia S., "Upgrading Paper Production," The China Business Review, January-February 1986, pp. 39-44.