Niu Qingmin, president of the Paper Industry Association in Jiangsu province, said that the slowing growth in China's paper industry is a reflection of a so-called periodic excess capacity.

"China's paper industry is going through a period of deep restructuring, because we developed too fast in the beginning, even at the expense of our environment," he said.

"If the highly polluting factories are shut down, it will leave more room for the development of regulated companies. In such a scenario, overcapacity will no longer be an issue," he said.

Niu said that China's paper market will maintain steady growth in the long term, especially in the packaging and tissue sector.

The Finland-based company said it plans to offset losses in stagnant markets like Europe, by focusing on packaging, paper boards and paper tissue business growth in Asia.

Rosendal said that Kemira has more than doubled its capacity in China after setting up the Nanjing facility.

"It is quite an aggressive expansion in China, considering how much we generated for the past year."

The chemicals company raked in about 100 million euros ($124.7 million) in China in 2013, and it plans to invest $100 million on the Nanjing unit, which will be the largest of its kind in Asia.

Kemira acquired the Netherlands-based AkzoNobel's global paper chemicals business in July to help double its paper chemicals business in Asia Pacific, and expand its geographic reach and product portfolio.

"We don't just go around buying up companies to show how big we can get. It is a requirement of the market," Rosendal said. "We believe both production and demand will continue to grow in the world's largest paper market."