Asia Pulp and Paper Co. Ordered to Stop China Venture

Beijing, China, 07 February 2007 -- Xinhua News Agency -- China's State Forestry Administration has ordered a division of Indonesia-based paper giant, Asia Pulp and Paper Co. (APP), to immediately stop attempting to buy a large area of state-owned forest.

Hainan Jinhai Pulp and Paper Company had breached regulations by trying to acquire a 58% stake in the state-owned Yunnan Yunjing Forestry and Pulp Company in southwest China's Yunnan Province. This would have involved the transfer of 1 million mu (667 square km) of woodland, said administration spokesman Cao Qingyao on Wednesday.

The worth of the woodland hadn't been valued legally and the sale price the two companies had agreed upon was too low. Specific numbers remain confidential, Xinhua was told by the administration.

To prevent the loss of state assets Chinese law requires that all transfers of state-owned forest resources follow strict evaluation procedures and conform to State Council earnings distribution regulations.

However, some local governments had leased and sold state or collectively-owned forest resources to enterprises at less than market value or manipulated such deals, said Cao. He said the practice seriously harmed public interest.

The Yunnan provincial government was considering ways to resolve the problem, Cao added.

In 2005 the government investigated an APP project in Yunnan Province involving illegal logging of over 2700 cubic meters of timber.

The Hainan Jinhai Pulp and Paper Company is the 13th such business in which APP has invested on the Chinese mainland and had an output of 800,000 tons in 2005.

APP, a subsidiary of the Indonesia-based Sinar Mas Group, is one of the world's largest paper and pulp producers. It owns 18 subsidiaries and more than 20 forest farms in China with 56 billion yuan (USD 7 billion) in assets.