WORLD PULP&PAPER 11 still reside with western suppliers, cultural, economic, and political factors favor the development of Chinese suppliers. We can see the growth of Chinese tissue machine suppliers in recent years in Figure 4: 1,052 machines were supplied in China since 2010. 84% (844) were sold by domestic suppliers. Most (839) were relatively small and slow (1,000 MPM or less), but that is changing. This trend presents a clear and interesting challenge for western suppliers accustomed to serving western customers. How will this trend develop and what must western suppliers do to preserve and expand their positions? China’s influence comes from how much it buys, not how much it makes. WHEN DOES SIZE MATTER? China’s influence comes from how much it buys, not how much it makes. China’s production is largely consumed at home. Of course, much of that domestic consumption is Chinese companies packaging goods that are destined for export, but the paper products themselves are not exported, per se. China only exports four percent of its production. Figure 3 shows that China is consuming an ever greater share of its economic output domestically, relative to the overall economy. Paper consumption will follow the overall economic average. As this happens, China will need to expand its paper making capacity. And, as that happens, the country will become an even more important buyer of both capital and consumables. IMPACT ON SUPPLIERS Decades ago, as western paper mills were built in great numbers, the supplier community grew up to serve them. Over time, suppliers in North America and Europe consolidated to form large, full-service providers. Today, China is the host of new mills hungry for capital, raw materials, and operating supplies. Since suppliers need to stay close to their customers, there is a premium for a China-based location. While much technology may Figure 4. 84% of paper machines in China were supplied by domestic companies.