Local governments have put in place all kinds of schemes to boost domestic consumption. Vouchers are the best-known option and Hangzhou is the city best known for pushing them. But these consumption-boosting measures range from mere encouragement (through voucher schemes) to obligation.
As we noted in a report on local protectionism that appears in the May issue of China Economic Review, local government organizations and development zones in Changchun are under orders to place automobile orders exclusively with local manufacturer First Automobile Works. Authorities in Anhui province have issued instructions to local businesses that they must only use locally produced industrial equipment in infrastructure and other projects.
Such measures are nothing new – just check out the cars used by taxi fleets in different Chinese cities – although it is sometimes unclear where encouragement stops and obligation begins. However, in these more difficult times, some local authority’s hunger for tax revenue was always going to push it to extremes. That authority, it appears, is the Gongan county government in Hubei province.
Apparently, Gongan’s leaders have ordered civil servants to consume 23,000 cartons of locally made cigarettes each year (which means more business for local companies and therefore more money in the government coffers). Cigarettes for official use have been put on the government’s purchase list, and those civil servants who fail to help the authorities meet their quota (worth nearly US$600,000 per year) will be fined.
Even schools have been given a cigarette quota, and eagle-eyed inspectors will sift through staff room ashtrays to check whether teachers are indulging in imported tobacco products.
The question is: Exactly what were the officials who devised this legislation smoking? (We ask this in the interests of public health, not commercial strategy. The tobacco industry in China is big yet fragmented, so a little local protectionism could actually go a long way.)
Update: The policy has since been rescinded.