Making a packet

A hard habit to break

Giving up smoking is hard as an individual. But it’s even harder for governments when cigarettes account for 6% of their tax revenue.

That’s the position that China finds itself in.

On the one hand it wants to reduce the number of smokers on public health grounds. On the other, it has built a state-owned tobacco industry which is on track to sell six billion more cigarettes this year.

At a meeting of cigarette producers earlier this month the deputy director of the State Tobacco Monopoly Administration (also known as Chinese National Tobacco Corporation) Duan Tieli said they and fellow state-owned producers had reached their annual target of 47.5 million boxes (or 2.34 trillion cigarettes; each box contains 250 packets) with “confidence and determination”.

Looking ahead, he said that the industry should strive to achieve “profit exceeding the best level in history”. The only recognition of the heavy toll that smoking takes on China’s health was a line he delivered about the “contradictions and problems” facing the industry.

The National Health and Family Planning Commission estimates that over a million Chinese die from smoking-related diseases every year. The World Health Organisation has said that that figure will hit two million a year by 2030 and that more than 200 million Chinese will die from smoking-related illnesses this century. As a result the government has set a target of reducing the number of smokers from 28% of the adult population to 20% as part of its Healthy China 2030 plan (there are currently about 315 million smokers).

Two main questions arise: is a cut of eight percentage points in the smoking population ambitious enough? And is it an attainable target, given the rather different ambitions of the State Tobacco Monopoly Administration?

Thus far it has resisted the introduction of graphic health warnings on cigarette packets, saying they don’t fit with “Chinese cultural traditions”.

Tobacco officials have been known to argue that curbs on smoking are “unpatriotic” because they would deprive the government of more than Rmb1 trillion ($144 billion) of income a year. They also play on the fact that the anti-smoking lobby in China has connections with foreign organisations.

“Without our contributions the second aircraft carrier would just be a drawing, there would be no high-speed rail. Nor would you have such good social welfare,” the China Tobacco website claimed this year.

The tobacco industry has pushed back hard on smoking bans too. After Beijing and Shanghai outlawed smoking in public places in 2015 and 2017 it was thought that Hangzhou would be next.But a proposed blanket ban was softened under pressure from the China National Tobacco Corp and the new regulations allow smoking in bars, karaoke clubs and in designated areas in railway and bus stations.

“When it comes to the tobacco industry’s obstruction and interference in implementing specific tobacco control rules, China has a serious problem,” Reuters quoted Yang Gonghuan, former head of tobacco control at the Chinese Centre for Disease Control and Prevention, as complaining.

Yang says the industry was nervous when it saw sales drop after the Beijing ban and a small tax increase in 2015. But business has bounced back. “China’s smoking rate is the highest in the world. With global smoking rates continuing to decline, China’s increase in tobacco sales is puzzling,” commented Cui Xiaobo, secretary-general of the Beijing Tobacco Control Association.

Interestingly, state media took a tougher line. “Increased tobacco sales are contrary to the trend of tobacco control in China. If the tobacco industry is allowed to increase sales, this is clearly irresponsible for public health,” wrote the China Youth Daily.

“As a state-owned enterprise, tobacco producers should understand that profit is not the first priority. They should not forget that they also need to adhere to principles of corporate and social responsibility,” agreed state broadcaster CCTV.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.