[Intl-tobacco] China Tobacco Says No Plans to End Monopoly

[Robert Weissman]

May 16, 2003
China Tobacco Bureau Says Reforms Won't End Govt Monopoly
Dow Jones Newswires

BEIJING -(Dow Jones)- China's tobacco monopoly has denied its days are numbered,
state media reported Friday, despite reforms to free up the tightly regulated
market. A State Tobacco Monopoly Bureau spokesperson dismissed as without
foundation suggestions tobacco enterprises will be allowed to sell stock
to the
public or that local tobacco producers will be allowed to set up joint ventures
with foreign firms, the Xinhua News Agency reported. Those comments are
an apparent
response to an April article in the China Daily newspaper that quoted an unnamed
tobacco official as saying the government monopoly on tobacco trading
will be
"completely removed" within two years.

China is estimated to be both the world's largest tobacco producer and
its largest
consumer with more than 320 million smokers out of a population of about 1.3
billion. Cigarette smoking faces significantly less regulatory and
social pressure
in China than it does in most Western countries, partly because the tobacco
monopoly is a large source of government revenue.
Despite the bureau's stance, there are changes that promise to loosen up the
tightly-regulated tobacco sector. By the end of 2003, licensed Chinese tobacco
retailers will no longer need a separate business license to sell imported
cigarettes.

However, China has made no commitments to open its tobacco market to foreign
competition. Retailing and distribution of tobacco was specifically
excluded from
the market-opening commitments made to the World Trade Organization. Imported
cigarette are available in China, but foreign companies have long sought
access to
local production and distribution to avoid high tariffs.  In 2002,
tobacco company
Gallaher PLC (GLH) signed an agreement that will allow the U.K. company to
distribute a brand in China. The maker of Benson & Hedges, Mayfair and
Silk Cut
brands has said it expects to begin distributing cigarettes in China by
the end of
2003.