Abstract: Competitiveness of an industry is reflected ultimately by the market control abilities of products, enterprises and industry. Michael Porter pointed out five factors impacting industrial competitiveness in the diamond model, namely barriers to entry, threat of substitutes, buyers and sellers' bargaining power and existing competitors. Paper industry is an important part of national economy and an important component of forestry industry. Based on the analysis of current status of China's paper industry, this paper calculates international competitiveness of China 's paper industry through international market share, comparative advantage index and trade competiveness index. Using Five- Force model, this paper analyzes international competition environment of China's paper industry. The results show that China is undergoing a transition to having a comparative advantage, but it is still in a relatively disadvantaged position in international competition, whith is reflected in low barriers to entry, the poor bargaining power of suppliers and buyers, fierce industry competition and the appearance of the threat of substitutes. This paper also puts forward proposals based on the research results.