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An empirical analysis is made, based on the capital allocation efficiency model of Jeffrey Wurgler, on the quantitative relationship between physical capital growth and profit growth of Chinese papermaking and paper products industry. The results show that the physical capital allocation of China papermaking and paper products industry is inefficient. Therefore the main factors which constrain physical capital allocation efficiency of China papermaking and paper products industry are further analyzed from the viewpoint of capital management and financial channel. Finally, at the aspects of business model, capital utilization and regional layout, the systematic countermeasures are suggested to optimize physical capital allocation efficiency of Chinese papermaking and paper products industry.

First of all, the paper discusses the theoretical relationship of financial ability and industrial development. It is suggested that the financial ability is the basic requirement of industrial development, and is the comprehensive reflection of industrial competitiveness. Second, the status quo of the financial ability of Chinese timber industry is analyzed in such respects as internal financing, equity financing and debt financing. It is concluded that the financial ability of Chinese timber industry is weak. There are some problems in such respects as internal financing, equity financing and debt financing. Finally, aiming at existing problems, the paper puts forward relevant policy suggestions.