Strict Policy on Tobacco Advertising Expected to Restrict Import
Although China is gradually opening up its markets after its entry into the World Trade Organization (WTO) in November 2001, the strict policy on tobacco advertising imposed by the Chinese government is expected to restrict the import of cigarettes into t
After the WTO entry, China is viewed by transnational tobacco companies as the largest tobacco market in the world. For transnational tobacco companies, they are all attaching increasingly great importance to the China market with a smoking population of 340 million, as they are under the pressure of paying huge sums of compensation for health damage and as public awareness about the harm of cigarette smoking is being enhanced in their own countries.
After the WTO entry, China is gradually easing restrictions on tobacco monopoly and lowering tariffs on tobacco imports. But at the same time, the government is imposing a strict policy on tobacco advertising, which may contribute to restricting the access of transnational tobacco companies to the China market.
Each year, Chinese smokers consume 1.7 trillion cigarettes, which accounts for 30 percent of the annual cigarette consumption of the world. However, foreign cigarettes legally imported into China have taken only a three-percent market share in China.
After the WTO entry, the tobacco industry of China is still one of the few industries cosseted by the government. Although ChinaÂ¡Â¯s average tariff rate of 230 percent on cigarette imports is expected to go down, it may well remain significantly higher than those of other WTO members.
In China, tobacco manufacturers are scattered across the country and are highly regional. They produce cigarettes of more than 2,500 brands. More than 90 percent of the cigarettes made in China are produced by State-run tobacco manufacturers. Such competitive brands as Chunghwa, Mount Hongta and Yunyan make up roughly 20 percent of the domestic cigarette sales.
In China, taxes from cigarette sales account for 10 percent of the tax revenues for the State. In 2001, the tobacco industry contributed 100 billion yuan (12 billion U.S. dollars) in taxes to the State.
Transnational tobacco companies, with the expertise to develop nationally advantaged high-quality cigarette brands, are all trying to take a share of the China market.