At China's State Tobacco Administration, Mr. Li Fuchen, the director of the general office, leans back in his chair, and lights up his upteenth cigarette of the day. As is politically correct for a man in Mr. Li's position the name on the red and white pack is General, a domestically produced brand.
Mr. Li is in a strange position. His department exists to protect the lucrative Chinese e tobacco industry against invasion by the west. But at the same time Mr. Li is part of a central government which campaigns against smoking because of the costs in health and welfare.
"Smoking isn't good for people," says Mr. Li, "so we don't want to in-crease production. We don't want to encourage people to smoke."
Since 1950, China's population has doubled. In the same period, cigarette consumption has increased fifteen times. China produces thirty per cent of the world's tobacco. An estimated 400 million Chinese smokers puff and wheeze their way through 1,625 billion cigarettes a year, a fact which fills health officials with alarm and foreign tobacco companies whose markets are dwindling in the west, with glee.
Cigarettes are the currency of small-time corruption in China, offered and accepted almost as readily as hard cash. -They are handed out like sweets at receptions. Between officials, a cigarette exchanged is like a secret handshake between members of the same masonic society. Between a supplicant and an official a cigarette is as good as a nod and a wink. Between entrepreneurs, cigarettes are tossed across tables to ac-company beer or cognac over a raucous meal, a tangible reminder of prosperity and friendship. Men make up the bulk of China's smokers, but even young women pose with a cigarette held elegantly between their finger tips in the bars and nightclubs of big cities.
But China's tobacco industry is a state monopoly, the most successful industry in China, and the most lucrative for the central government, which earns almost ten per cent of its income from tobacco levies. Last year, the tobacco trade turned over levies of 27 billion yuan to the state ? sixty per cent of the cost of every packet of cigarettes is tax.
China's doors have been flung wide to many imports, and joint ventures have been established in many fields. But foreign cigarette manufacturers have been all but left out in the cold.
In 1988, RJ Reynolds Tobacco Inter-national opened a joint venture factory in Xiamen producing Camel and Winston cigarettes. A Rothmans International joint venture recently went into production in Shandong. And cigarettes will soon start rolling off the production line at a joint venture with the Hong Kong Tianli international economic and trade limited company. But that still only adds up to three joint venture cigarette-producing factories in China.
Mr. Li Fiche explains why such a small number of foreign cigarette companies have been allowed in.
"We wanted to study their management methods," Mr. Li explains with disarming frankness.
"Now we have these three, and we've studied the way they do things, we don't need any more. We have no plans for any more. Mind you, that's what I'm saying today. Maybe there will be a change in policy.
"A joint venture doesn't make us as much as we make on our own. If they take some of our profits, there is less left for us."
China has the same protectionist attitude to imported cigarettes. A wholesale market for tobacco is to be set up in the Pudong zone in Shanghai, but Mr. Li stresses that this is aimed at better con-trolling the influx of cigarettes, not at letting any more in.
More than ninety per cent of China's smokers buy domestically-produced cigarettes, and most popular brand is Hongmei, produced by Yuxi Cigarette factory in Yunnan province. Panda cigarettes, famed as the preferred puff of senior leader Deng Xiaoping, are no longer in production. The old man himself is said to have kicked the habit.
Many young urbanites, however, think that foreign brands impart a cachet of westernisation and sophistication. Perhaps most well known is Marlboro, in part because the image of the carefree horseman has captured the popular imagination. Less than 1 per cent of foreign cigarettes on the Chinese market gain access to the country legally through customs. They are sold by designated hotels and restaurants primarily for the consumption of foreigners at perhaps 7 or 8 yuan a packet, where domestically-produced cigarettes are sold at about 4.5 yuan. In 1990, the Worker's Daily estimated that smugglers brought more than 175 million cartons of cigarettes into China, making a profit of between one hundred and three hundred per cent.
Another headache for China's tobacco monopoly administration is the influx of fake brand cigarettes onto the market. In mid-December, Beijing announced it had confiscated 9.3 tons of low quality tobacco, worth about 70 million yuan. In 1983, China closed about 300 surplus tobacco factories, and it is thought that in some cases the laid off staff are putting the old equipment to use.
One or two cigarette producers have tried to claim health benefits for their products. One claimed to have produced a cigarette which cured piles, another marketed a cigarette claiming it prevented cancer. But in general, it is well known in China that smoking is harmful.
Although it was estimated in 1990 that smoking was increasing ten per cent a year in China, the tobacco monopoly is proud that production this year fell by 1.4 per cent compared to last year.
From 1st January 1992, all packets had to bear a warning that smoking was harmful to health. All cigarette advertising was in theory banned, but the Tianjin television tower recently accepted a huge Kent advertisement which now dominates the city skyline. Junior and middle school students have been for-bidden to smoke. All China's domestic flights are non-smoking, and smoking is restricted in some public places, and on some public transport.
"There is some controversy," admits Mr. Li, "some people want to put up production. But our government wants to raise the quality and lower harmful effects, so the price will go up and the profits will be the same. For instance, we are increasing the production of filter tips ? already more than sixty per cent of our cigarettes are filter-tipped."
Pragmatic as ever, such decisions have been taken by Beijing in the face of evidence that it makes sense. The World Health Organisation estimates that by the year 2025, 8 million people a year worldwide will die of a smoking-related disease, with two million in China alone. A study by the Chinese Academy of Preventive Medical Sciences found that in 1989 China gained about 24 billion yuan from tobacco sales but that in the same year, cigarette smoking cost the country 28 billion yuan in medical charges and fires caused by cigarettes. Curing tobacco over wood also contributes significantly to China's environmental problems, causing deforestation.
The fact that production has gone down does not necessarily reflect reduced demand, since it does not make allowance for the huge numbers of smuggled imports, or for large stock-piles, the result of overproduction in the eighties.
Anyway, Mr. Li knows he will never be out of a job.
"You can't completely ban cigarette smoking," he says. "After all, if a man wants to smoke and we don't let him, he'll probably turn to something else." *
You must log in to post a comment.
Yes, I would like to receive emails from China Economic Review. (You can unsubscribe anytime)
Copyright © 2018 SinoMedia Group Limited All rights reserved