Hongta (Red Pagoda) Group, China's largest cigarette producer and Imperial Tobacco (IT), the world's fourth largest tobacco manufacturer, signed a 10-year agreement to produce and sell IT's West brand of cigarettes in China.
It is the second deal between a foreign major and a Chinese producer, following a contract between the Gallaher Group and Shanghai Tobacco in November. The Shanghai firm will make and sell the Memphis brand in China, while Gallaher will make and sell Shanghai's Golden Deer brand in Russia.
IT is the world's fourth-biggest producer, after Altria, the former Philip Morris, British American Tobacco and Japan Tobacco.
From January 1, 2004, the tariff on imported cigarettes will fall to 25% from the 65% before WTO entry and that on imported tobacco leaf will fall to 10% from 40%.
In January 2005, China will abolish quotas on imported cigarettes.
China is the world's largest cigarette market, with more than 300 million smokers.