China begins aggressive strategy to conquer global tobacco market

An investigation by the global investigative journalism network Organized Crime and Corruption Reporting Project (OCCRP) has raised concerns about the new global strategy of the Chinese tobacco monopoly, the China National Tobacco Corporation (CNTC).[1]The takeover of the global market by the Chinese state monopoly, particularly through illegal means, could undermine progress in tobacco control and public health.

The term "tobacco industry" is traditionally used to refer to the major listed companies: Philip Morris International (PMI), British American Tobacco (BAT), Imperial Brands and Japan Tobacco International. Excluding China, these four companies hold approximately 80% of the global tobacco market. The Chinese state monopoly, CNTC, however, occupies a behemoth position, controlling 45% of global cigarette and heated tobacco production, according to Philip Morris figures. The vast majority of Chinese production is still absorbed by domestic consumption. For this reason mainly, CNTC has remained very little known to institutions, the media or even research to this day.

China's takeover of the tobacco production chain

The OCCRP investigation shows that CNTC is now engaged in an aggressive globalization strategy. In recent years, the Chinese monopoly has multiplied its number of subsidiaries around the world in the entire manufacturing process: purchasing leaves, growing tobacco. According to journalists, Chinese subsidiaries have become central players in tobacco production in some countries such as Zimbabwe and Brazil.

Thus, in 2019, more than 19% of Brazilian tobacco exports were controlled by Chinese subsidiaries, representing approximately 386 million dollars. In 1997, the Chinese share of Brazilian tobacco exports was only 1%, for 12 million dollars. This takeover by Chinese subsidiaries is sometimes to the detriment of local farmers, who are penalized by unfair contracts and too low remuneration. In its article, the OCCRP also points out the involvement of the Chinese nebula in situations of slavery in Brazil.

Penetrating international markets through illicit trade

But the Chinese monopoly is also seeking to conquer new markets, using a tool already widely tested by tobacco multinationals: illicit trade. Indeed, the tobacco industry has used illicit trade as a means of penetrating closed markets, as it did in the former Soviet countries in the 1980s and 1990s. According to the investigation conducted by OCCRP journalists, individuals and companies linked to the Chinese state monopoly have supplied the European and Latin American black markets through smuggling networks.

In Europe, China partners with organized crime

In Europe, there is only one factory owned by the CNTC, located in Romania. While this company, the China Tobacco International Europe Company (CITEC), legally sells cigarettes in the old continent, mainly in shops duty free airports, its products are also distributed across borders through smuggling. For example, Italian police dismantled an illegal maritime transport system, aimed at supplying Europe with contraband cigarettes, involving a CTIEC official and smugglers linked to the Camorra, the Neapolitan organized crime.

Massive smuggling, including in war zones

The organization of illicit trade extends beyond European borders, and illegal cigarettes from the Chinese monopoly or its subsidiaries end up in conflict zones, such as Syria, Libya, and Iraq. As a previous OCCRP investigation showed, smuggling is a major factor in regional destabilization, by financing or militarizing local militias or terrorist groups. In addition, OCCRP's work has identified smuggling networks affiliated with the CNTC in the United States, Colombia, and Panama, described as the "Disneyland of smuggling." As of July 2020, Colombian authorities had managed to confiscate nearly 100 million packs of cigarettes, for a country with 50 million inhabitants.

An unregulated state monopoly

These practices are in fundamental contradiction with the World Health Organization Framework Convention on Tobacco Control (FCTC), to which China is a party but which the CNTC had opposed. However, the tobacco sector occupies a preponderant economic place in the eyes of the Chinese government, being the source of 11% of the country's tax revenues. As the OCCRP investigation highlights, the CNTC shares the same website and the same employees as the Chinese authority supposed to regulate the tobacco industry in the country. Thus, a growing number of observers point to the numerous violations of the FCTC by the Chinese monopoly, which multiplies its charitable works, sponsorships, social responsibility activities and advertising campaigns.

A clear threat to public health

To block regulation in China, the CNTC is arguing the economic weight of the sector, employing 100 million people across the country. This figure, which is particularly high, could potentially be exaggerated and deserves to be considered with caution. Furthermore, the Chinese monopoly even goes so far as to question studies pointing to the health risks associated with smoking. In a letter addressed to the decision-making bodies of the Chinese state, the CNTC argued in 2018: “Health data is controversial and many smokers live long lives […]. An unscientific anti-smoking campaign would not achieve the objective and would be misleading.”

According to the World Health Organization, one in three cigarettes smoked worldwide is consumed by China's 300 million smokers. Yet the government's current tobacco strategy is paying the highest price in China. Every year in the country, nearly two million people die prematurely from smoking, including 100,000 from second-hand smoke.[2].

FT

Keywords: China, CNTC, Smuggling

© SHEPHERD ZHOUF/FEATURECHINA/MAXPPP

©Generation Without Tobacco

[1] Alessia Cerantola and Andrei Ciurcanu, OCCRP, China's State Tobacco Company is Massive at Home. Now it's Ready to Take Over the World, 06/22/2021, (accessed 06/23/2021)

[2] World Health Organization, Tobacco in China, (accessed 06/23/2021)

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