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March 8th, 2012:

State tobacco monopoly makes 320m yuan a day

Critics say profitability of cigarette industry is reason government won’t seriously crack down on smoking

Will Clem in Shanghai 
Mar 08, 2012

China’s state-run tobacco monopoly rakes in more than 320 million yuan (HK$393 million) in profits every day, according to figures released for the first time this week that expose the sheer magnitude of the mainland’s tobacco industry.

The China National Tobacco Corporation (CNTC) amassed net profits of almost 118 billion yuan in 2010, a windfall that anti-smoking campaigners say explains officials’ lacklustre attempts to enforce anti-smoking legislation.

The figures show the company as being one of the mainland’s most profitable organisations that year, beating the Bank of China’s profits of 110 billion yuan and coming close to China Construction Bank (SEHK: 0939announcementsnews) ‘s 135 billion yuan.

The cigarette giant’s financial details were included in a report that the Industrial Bank filed to the Shanghai Stock Exchange ahead of a planned sale of a 5.2 billion yuan stake to CNTC. The report did not give the company’s statistics for last year, but listed its assets at almost 970 billion yuan.

Anti-smoking campaigners say the figures show the enormous revenue value of the tobacco industry to the government – on top of 753 billion yuan in tax last year.

The mainland is home to an estimated 300 million smokers, the largest number in any single country.

Dr Wu Yiqun , vice-director of the Think Tank Research Centre for Health Development, said CNTC’s financial figures were “tragic” but unsurprising.

“Our NGO has been investigating the domestic tobacco industry for several years, so we already had a good idea of the figures involved,” she said.

“This figure is higher than what we had estimated, but not a total shock. What really bothers me is not the statistic of 322 million yuan [in daily profits], but what lies behind it. That huge figure comes from the destruction of public health, and to put it bluntly, it is held up by a mountain of bones.”

Wu said that, despite six years of government attempts to curb smoking, cigarette sales had continued to increase year after year.

According to the State Tobacco Monopoly Administration, last year’s tobacco tax take was up 22.5 per cent from 2010, which in turn was up almost 17 per cent from the year prior.

“It has been a very difficult process, and almost impossible to make any progress,” she said, adding that the organisation was currently lobbying delegates of the National People’s Congress and the Chinese People’s Political Consultative Conference to push for stricter legislation.

“Our single hope is that relevant government departments can take notice of the scale of the problem, but so far we are not optimistic.

“There is a commitment to a smoking ban in the 12th five-year plan, and we must hope that can be achieved.”

She said that the decision to include Professor Xie Jianping , deputy director of CNTC’s Tobacco Research Institute, as one of 54 scientists added to the Chinese Academy of Engineering last December, showed that officials were not serious about clamping down on smoking.

“That award sent exactly the wrong message,” Wu said.

China ratified the World Health Organisation’s Framework Convention on Tobacco Control in 2005, pledging a smoke-free public environment by January of last year, but little progress has been made.

Tougher national legislation was passed in May, but a survey by an environmental group in November found that just one in five restaurants in Beijing were obeying the rules.

Shanghai implemented a city-wide smoking ban covering most public places in 2010, but it is not strictly enforced.

The Shanghai Health Promotion Commission admitted last week that just 66 institutions and five individuals were fined for breaching the rules last year.