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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 technology spillover effects of foreign direct investment on Chinese papermaking and paper products industry are analyzed empirically. It is confirmed that the technology spillover effects of foreign direct investment on Chinese papermaking and paper products industry are significant. Second, according to practical situation of Chinese papermaking and paper products industry, the paper analyzes the technology spillover channels of foreign direct investment on Chinese papermaking and paper products industry. Third, on the basis of the different technology spillover channels, the countermeasures were made to enhance technology spillover effects of foreign direct investment.