That often led to the destruction of virgin forests as new mills sought cheap supply sources to meet production targets.

"It's really shocking how little people have been looking into the wood supply issue," he said from Indonesia as CIFOR released an eight-year study into the world pulp industry (http:/www.cifor.cgiar.org/docs/_ref/media/release/2006/pulp/index.htm).

The World Bank's private funding arm, the International Finance Corporation, took issue with the comments, saying it did not finance projects without an environmental and social impact study.

The study looked into 67 pulp mill projects as CIFOR expected investment of US$50 billion to US$60 billion in the sector in the next 10 to 15 years after about US$40 billion was spent in the past 10 to 15 years.

"The Chinese market is driving a lot of growth in global pulp and paper. And after China -- 10 to 15 years down the line -- we can see India may be a similar story," Kaimowitz said.

The study said pulp mills, such as Asia Pulp and Paper (APP) and Asia Pacific Resources International Ltd. (APRIL) from Indonesia, often overestimate what was available from timber plantations.

Both APRIL and APP denied any wrongdoing.

"The company is a fully sustainable operation," APRIL president A.J. Devanesan said in a statement.

STRONG CHINESE DEMAND

Chris Barr, CIFOR policy scientist, calculated that Chinese demand for paper and paperboard would hit 68.5 million tonnes in 2010, up from 48 million in 2003 and 14.6 million tonnes in 1990.

China, the world's number-two paper producer after the United States, would need to cover a large part of its need from abroad, in part also due to a logging ban at home and closures of small, polluting mills that had used agricultural residues.

"China's growing demand will exacerbate current pressures on natural forests and provide added incentives for illegal logging," Kaimowitz said, adding it was likely to source also from Brazil or Indonesia where forest governance was weak.

Greenpeace said in March that China was at the heart of a global trade of plundering endangered rainforests in Southeast Asia, as it manufactured furniture plywood and veneer from imports of timber from illegal logging.

CIFOR urged financial institutions, including private players, to make greater efforts to acquire information about wood supply and use independent auditors before lending.

Kaimowitz said banks like the International Finance Corp were not examining the wood source even at a US$1.7 billion project being built in Uruguay, for which it promised an environmental study after massive protests over potential pollution.

While the IFC was looking into problems such as water pollution that had sparked the outcry, it was not monitoring wood supply for the mills, to be built by Finland's Metsa-Botnia and Spain's Ence, he said.

The IFC disagreed.

"In the case of both pulp mills in Uruguay the source of wood is exclusively plantation grown Eucalyptus which is also fully FSC certified-no natural forest sourcing whatsoever," the lender said in a statement.

"We agree there must be rigorous assessment of the sustainability and sustainable management of this wood supply, and IFC's new performance standards -- which CIFOR completely ignored -- address this issue specifically," IFC said.