Stora China-II Stora Enso Oyj (Stora Enso or the sponsor), the worlds largest paper and board producer in produced tonnes and number three sawn timber producer, has approached IFC to extend its existing loan facility to finance the development of its timber plantation and related investments in China.  China is the second largest and fastest growing paper market in the world, yet it is critically short of timber/fiber.  China accounts for over a third of the total increase in global paper capacity for the period 2001-2006, however the countrys short supply of fiber has led it to import unsustainably harvested fiber from neighbors such as Russia or the Pacific Rim.  Stora Ensos current projects in China include expanding its plantation in the Guangxi province of Southern China, which began operating in 2002, a paper mill in Suzhou, which was acquired by Stora Enso in 1998 and a joint venture with a Chinese company, Shandong Huatai Paper; this project will include transferring an existing paper machine to China.      Stora Ensos immediate financing need is to continue to help cultivation of their plantation.  These investment projects, combined with Stora Ensos other possible investment projects in China comprise an estimated $500 million investment program over the three years.  In June, 2005, IFC signed a loan facility agreement (the Existing Facility) with Stora Enso for $75 million.  However,  to meet their increased financing needs in China, Stora Enso has asked that IFC increase the amount of the facility by $225 million (the Increased Facility), bringing the total financing provided/arranged by IFC to $300 million (together, the Facility). The proposed IFC investment would assist Stora Enso, a global leader in the forestry industry with a strong brand name, to pursue an aggressive investment program in China.  The proposed investment program would have a strong developmental impact, especially with respect to the plantation investments.  First, despite the fact that 24% of the worlds plantations are in China (representing 28% of Chinas forested areas), Chinas plantations remain underdeveloped for industrial use.  Measures to improve this include a higher timber growth rate and more efficient forest management.  Chinas logging ban in effect since the late 1990s has further curtailed access to fiber.      Given the resultant lack of internal fiber capacity, Stora Ensos creation of a sustainable plantation would help reduce the countrys reliance on imported fiber.  Second, Stora Enso will transfer technical know-how and, given the labor intensity of plantation work, create up to 7,000 direct jobs to add to the 1,000 that are currently employed and an additional 21,000 indirect jobs to add to the current 3,000.  As important, since the plantation project is in Guangxi province, whose estimates $1,014 per capita GDP in 2005 was 84% less than that of Shanghai ($6,276) and nearly 40% less than that the average per capita GDP for China ($1,701) as a whole, Stora Ensos operations in China will help promote more balanced economic development.      IFC estimates that when the plantation reaches its intended 120,000 ha and 32,000 direct and indirect employees, the average annual income of these employees will exceed $1,800, or 80 percent higher than Guangxis current GDP per capita.  The plantations and related entities would also have strong linkages with local distributors through sales of timber and other fiber resources, encouraging their further growth and development.  Finally, the sponsors application of its high environmental standards should have a demonstration effect on the rest of the industry, especially on local companies.   The proposed investment program also complements the new Chinese governments objectives for its less developed regions.  One of the governments primary goals is to balance China''s development success to better support the inland regions and the agricultural economy.  IFC''s support to this project will lead to increased cash flows for farmers as well as the creation of jobs in rural areas.