North Asia News Tue, 11 Feb 2003, 9:32pm HKT China to Ease Curbs on Foreign Cigarette Sales (Update1) By Eugene Tang, Jiang Jianguo and Luo Jun
Shanghai, Feb. 11 (Bloomberg) -- China will scrap a retail license for sales of foreign cigarettes and cut import taxes, making it easier and cheaper for the nation's 350 million smokers to buy Kent, Marlboro and other overseas brands.
Taxes on cigarette imports will be slashed to 25 percent from 65 percent next January, when cigarette vendors will be able to sell local and foreign brands under a single license, said Xu Dan, spokeswoman at China's State Tobacco Monopoly Administration, which runs the nation's tobacco industry.
``The move will bolster the sale of foreign brands because Chinese consumers consider them to be premium products,'' said Li Wei, Shenyin Wanguo Securities Co.'s investment manager.
One person in every four smokes in China, one of the few havens left for British American Tobacco Plc, Philip Morris Inc., R.J. Reynolds Tobacco Holdings Inc. and other companies as governments in North America and Europe crack down on lighting up in public. China's tobacco industry last year posted profit of 140 billion yuan ($17 billion), up 17 percent.
BAT, Philip Morris and Germany's Reemtsma Cigarettenfabriken GmbH are among companies that see growth potential in China, where one out of every 10 cigarettes sold is a foreign brand and the market is growing 5 percent, or adding 18 million smokers, a year.
``This is a complete opening of China's tobacco industry,'' State Tobacco Director Jiang Chengkang was quoted as saying by state-run Xinhua New Agency. ``We will remove all restrictions on imported cigarettes, regardless of their origin.''
BAT has been in talks to form a factory in the southern Chinese province of Sichuan to make cigarettes with a unit of State Tobacco. Reemtsma plans to share technology with Yunnan Yuxi- Hongta Tobacco Group, China's biggest tobacco grower and largest cigarette producer.
With 146 manufacturers, China makes about 1.6 trillion cigarettes each year, about 38 percent of the world's production. The industry contributed 115 billion yuan ($13.9 billion) in taxes in 2001, the statistics bureau said.
The opening of the tobacco industry was part of China's pledge for joining the World Trade Organization. Most of the foreign cigarettes now sold in China are either smuggled goods, or local cigarettes repackaged with fake labels such as ``Maltoro.''
Foreign brands sold legally make up less than 0.5 percent of annual sales, State Tobacco Research Director Lv Zhongxing said.