China tries to get serious on price limits for cigarettes

News›China

Patrick Boehler

China’s tobacco regulator is trying to enforce a price ceiling on cigarettes this year amid a general move to promote the government’s austerity plans.

Luxury brands may not charge more than 1,000 yuan (HK$1,260) for a box of cigarettes, according to two internal “urgent notices” sent by the deputy director at China’s State Tobacco Monopoly Administration, Southern Weekly reported on Thursday [1].

While other countries are raising cigarette prices to deter people from taking up the habit, China’s upper price limit is aimed at cracking down on rampant corruption hidden in the sale and re-sale of exorbitantly priced cigarettes.

The state-owned China National Tobacco Corporation holds a national monopoly and controls an estimated 40 per cent of the world’s cigarette sales.

An enforcement of these measures would bring the highest possible price of a mainland pack of cigarettes down to 50 yuan, about the average price of a pack in Hong Kong. Currently, a cigarette box on the mainland can be worth thousands of yuan.

Restrictions on the sale of luxury cigarettes started to appear last year, Southern Weekly said, when the national monopoly holder had already told its subsidiaries not to supply tobacco to brands selling for more than 1,000 yuan a box.

In December 2008, Zhou Jiugeng, a Nanjing district official, was dismissed [2] from his job after he was caught smoking Nanjing 95 Imperial cigarettes, priced at 3,000 yuan a box. He was later sentenced to 11 years in prison [3] for corruption. Last year, the Huashang Daily reported [4] that Good Cat branded cigarettes in Xian were sold for 5,600 yuan a box.

Until recently, luxury cigarettes have been frequently bought with government funds. In 2009, Hubei ordered [5] its officials to smoke their way through 230,000 locally sourced packs of cigarettes as part of an economic stimulus package.

Apart from being a status symbol, exorbitantly priced cigarettes are often given as gifts, which can conveniently be passed on or swapped for cash at pawn shops. One in six people in Beijing have received cigarettes as a gift, a health researcher at China Medical University told Bloomberg [6].

A serious crackdown on allowing officials to use public funds for cigarettes could have a “significant impact” on the industry, an unnamed official with the Yunnan subsidiary of China National Tobacco told the Guangzhou-based weekly. Premium cigarettes, those selling at more than 15 yuan per pack, account for 60 per cent of the company’s profit, Bloomberg reported in February [6]. The industry employs 20 million people.

The move comes after President Xi Jinping called for government austerity in a Politburo meeting on December 4. Earlier this week, the People’s Daily, the party’s national mouthpiece, shamed a low-level official [7] for splurging half a local farmer’s annual salary on a banquet while Premier Li Keqiang (brother [8] to one of the deputy directors at the State Tobacco Monopoly Administration) was shown eating plain rice porridge.

China has more than 300 million smokers, including half the adult male population, the Ministry of Industry and Information Technology said in December [9].

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