JIN JILING, China — In silent temperature-controlled labs in a desolate part of Hainan, China’s most tropical province, rows of women in medical masks and lab coats clone trees that grow freakishly fast.

Wending Huang, Asia Pulp & Paper Co.’s chief forester in China, calls them his “Yao Mings” — after the towering Chinese basketball star. The tiny green tissue samples, methodically implanted in petri dishes, will become hardwood eucalyptus trees that need only four to six years to reach full height, up to 90 feet or more.

“And then we harvest,” said Huang.

Each year, Huang’s labs clone 190 million ready-to-plant “cutlings,” which APP grows on 790,000 acres of managed timberland spread over eight Chinese provinces. The company cultivates fiber-rich hardwood as intensively as U.S. agribusinesses grow gene-optimized corn and wheat.

The test-tube forests have helped undo the long-standing natural advantage of papermaking states such as Wisconsin, where hardwood trees are plentiful but can take up to 10 times as long to reach harvesting height. What’s more, boosted by billions in government subsidies, China has been building massive new mills with automated machines that can produce a mile of glossy publishing-grade paper a minute.

At a time when U.S. paper mills were already fighting off a digital death, China has become a sudden, potent adversary — a threat even greater than the rise of laptops and the iPad.

China came to dominate the manufacturing of electronics hardware and touch-screen technologies by marrying cheap labor with sophisticated engineering and automation — able to adopt design changes and adjust to demand shifts virtually overnight.

China has brought that same approach to paper.

Over the course of the past decade, China tripled its paper production and in 2009 overtook the United States as the world’s biggest papermaker. It can now match the annual output of Wisconsin, America’s top papermaking state, in the span of three weeks.

(Maine is the second leading papermaking state and employs 7,300 people, according to the Maine Pulp and Paper Association.)

Paper makes for an exceedingly unlikely focus. After decimating its natural forest cover decades ago, China lacks a fundamental necessity for printing-quality paper: wood pulp.

So China created the industrial-scale plantations.

And it created the world’s biggest and most efficient recycling scheme. It now buys some 27 million tons of scrap paper and used cardboard from around the world each year, then de-inks and re-pulps it for about two-thirds of its own paper and cardboard production.

But that is still not enough — for China’s needs or its ambition.

China imports the vast majority of virgin timber and processed pulp from around the world — 14.5 million tons last year alone from places such as Russia, Indonesia and Vietnam. China has so disrupted the market that 1.6 million tons came from the United States, where loggers and pulping operators are left searching for new customers when local mills close.

That all has earned the ire of environmental groups, which say China’s insatiable appetite for wood pulp is destroying the world’s forests. It has drawn the fire of Wisconsin politicians who accuse China of unfairly subsidizing its mills and dumping paper on the U.S. market, putting state operations out of business and an entire industry at risk.

With 20 modern mega-mills spread across China, Indonesia-based Asia Pulp & Paper is at the center of the accusations.

It is an unusual place to find a guy from Wisconsin.

Jeff Lindsay, 52, is a 20-year veteran of Wisconsin’s paper industry who was recruited by APP in 2011 to run its growing portfolio of patents.

The West, he says, is in denial about the competitive edge offered by Chinese science, engineering and ingenuity. And Wisconsin’s paper industry, he says, has lost the culture of investment, innovation and risk that defined it in the last century.

“You can only get so much from an old machine,” Lindsay said. “And only so much from your trade tariffs or whatever else you are doing to protect your product from lower-cost products from elsewhere before you eventually have to face the reality.

“You have to innovate to survive in this world.”

But China’s success is not nearly that simple.

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. The entire annual payroll for all of Wisconsin’s mills — including those making paper towels, tissue and cardboard — is $2.4 billion.

In China, there is government support at every step of the process. Subsidies support 30 percent of the total annual output of Chinese paper mills, according to Usha Haley, a New Zealand economics professor and author of “Subsidies to the Chinese Industry: State Capitalism, Business Strategy and Trade Policy.”

She notes raw materials represent 35 percent of the production cost of Chinese paper.

To be sure, there are grants, loans and tax breaks in the United States, typically aimed at boosting individual operations. The largest, in effect from 2005 to 2010, was for an alternative fuel known as black liquor, a byproduct of the pulping process. The subsidy averaged $280 million a year when it was in effect, about 7 percent of the size of the annual Chinese subsidy to its paper industry.

 

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