Hainan Jinhai Pulp and Paper Company had breached regulations by attempting to acquire a 58 percent stake in the state-owned Yunnan Yunjing Forestry and Pulp Company in southwest China's Yunnan Province, involving the transfer of a million mu (667 square kilometers) of woodland, said administration spokesman Cao Qingyao on Wednesday.

    He said the forest resources had not been legally valued and the sale price the two companies agreed on was too low. Specific numbers remain confidential, Xinhua learnt from the administration.

    To prevent the loss of state assets, Chinese law requires that all transfers of state-owned forest resources follow strict evaluation procedures and conform to State Council earnings distribution regulations.

    However, some local governments had leased or sold state or collectively-owned forest resources to enterprises at less than market value, or manipulated such deals, said Cao.

    He said the practice seriously harmed the public interest.

    The Yunnan provincial government was considering ways to resolve the problem, Cao said.

    In 2005, the government investigated an APP project in Yunnan province involving illegal logging of more than 2,700 cubic meters of timber.

    The Hainan Jinhai Pulp and Paper Company is the 13th major pulp and paper mill in which APP has invested on the Chinese mainland, and had an output of 800,000 tons in 2005.

    A subsidiary of the Indonesia-based Sinar Mas Group, APP is one of the world's largest paper and pulp producers. It owns 18 subsidiaries and more than 20 forest farms in China with 56 billion yuan (seven billion U.S. dollars) in assets.