These are likely to appeal to overseas Chinese, rather than serve as global brands, given their close affinity with Chinese cultural tastes and practices. 55 Yuetan South Street Number of CNTC brands (1990s–2013). Source: Compiled from BAT (2013), Hongta Group (2010), STMA (2006, 2009, 2012), Tobacco-free Kids (2010). Political instability and conflict over decades undermined attempts to regulate the industry (STMA, 1997). Source: Compiled from STMA (1997) and Zhou (2004). High profits and tax revenues sustained government support in China for cigarette manufacturing at the provincial, municipal and county levels over many decades. Following accession to the World Trade Organisation (WTO) in 2001, and facing growing saturation of the domestic market (Zhou & Cheng, 2006), the CNTC declared ambitions to ‘go global’ (Euromonitor, 2008). (, Trade policy, health, and corporate influence: British American Tobacco and China’s Accession to the World Trade Organization, ‘Key to the future’: British American Tobacco and cigarette smuggling in China, The globalisation strategies of five Asian tobacco companies: An analytical framework, Tobacco industry globalization and global health governance: Towards an interdisciplinary research agenda, Breaking and re-entering: British American tobacco in China 1979–2000, Tobacco control in China: still a long way to go, Eyes on the prize: Transnational tobacco companies in China 1976–1997, China’s Tobacco industry and the world trade organization, Global-market building as state building: China’s entry into the WTO and market reforms of China’s tobacco industry, British American Tobacco’s tactics during China’s accession to the World Trade Organization. There is also rapid growth of Chinese offshore production with over half of the 50.4 billion sticks of Chinese cigarettes sold internationally (2011) produced overseas (STMA, 2012). State-owned enterprise China National Tobacco Corporation is a near monopoly, manufacturing 98 percent of the tobacco products in China, … For example, there were negotiations between Hongta Group and Donskoy Tabak in 2012 for Hongta’s purchase of 0.5% share of Russia’s largest national tobacco manufacturer. Exports have grown rapidly by volume (Figure 6) following the establishment of five export manufacturing facilities in 2013. The paper does not draw on industry documents held in the Truth Tobacco Documents Library. The aim has been to reduce local government power over the industry, and increase competition across the same tiers in the industry, by dismantling its vertical structure and bureaucracy (Wang, 2009). Another indicator of globalisation is product development to promote a small number of Chinese ‘heritage’ brands overseas, as well as premium brands. In 1963, the China Tobacco Industrial Corporation was established to try to achieve greater efficiencies through centralised management of procurement, production and sales (STMA, 1997). (IBIS World, n.d.). These were previously searched to understand market access strategy by TTCs into China (Holden, Lee, Gilmore, Fooks, & Wander, 2010; Lee et al., 2004; Lee & Collin, 2006; Zhong & Yano, 2007). This was reduced to 30 brands by 2014, with many tailored to key markets (Feng, 2014a). Second, official Chinese data are government controlled and not verified by independent sources. However, exports remained small-scale and distributed across many different companies. Similarly, CNTC partnered with BAT to form China Tobacco British American Tobacco (CTBAT) International in 2013, with worldwide rights to BAT brand State Express 555, and Chinese brand Double Happiness outside of China (BAT, 2013). China National Tobacco also operates import and export businesses. Register to receive personalised research and resources by email, An International Journal for Research, Policy and Practice. First, as a government-controlled monopoly, the CNTC is not required to report as a public company (e.g. Given continued exclusion of TTC competition by the Chinese import quota system (Lee et al., 2004), and size of the domestic market, initial industry efforts were limited. We began by searching Google Scholar and Baidu Scholar to review the limited scholarly literature on the Chinese tobacco industry from public health, business studies and other relevant fields. Much secondary analyses, in turn, are based on official sources. The China National Tobacco Corporation (CNTC) is the largest cigarette producer in the world, with domestic and export sales totaling 2,589.08 billion pieces in 2015, approximately two and a half times that of the world's leading multinational tobacco companies, Philip Morris International and British American Tobacco. The result, a crowded and fragmented industry, was seen by the STMA as problematic ahead of WTO accession and foreign competition. If even partially realised, the global ambitions of the Chinese tobacco industry will have profound impacts for public health. Figure 6. Xicheng District The CNTC’s globalisation efforts are expected to intensify. Tobacco imports rose in value and quantity from 2001 (Table 1). Thus, they do not cover the CNTC’s expansion plans. There has been substantial consolidation, to transform a highly fragmented and inefficient industry, into fewer, larger and more competitive firms with clearer geographical (national, provincial and municipal), functional (manufacturing, sales and administration) and regulatory (central and provincial STMAs) delineation. This article is part of the special issue ‘The Emergence of Asian Tobacco Companies: Implications for Global Health Governance’. The corporation was dismantled in the wake of the Cultural Revolution in 1966 (STMA, 1997) and the industry reverted to its former fragmented structure. Premium brands enjoyed rising sales, as the economy boomed, with manufacturers releasing luxury versions of familiar brands or new brands. Read more As stated by STMA Director Jiang Ming, to ensure long-term development of the tobacco industry, ‘we must follow a “Big Tobacco” strategy’ (Huang, 1993). Third, we found inconsistencies in data on key indicators from different sources. To enhance global competitiveness, Chinese product development involved three strategies: consolidation of brands into a smaller number with mass appeal; adaptation to appeal to foreign markets; and higher value-added premium products. Despite the size of the Chinese industry, given its domestic orientation, analyses of tobacco industry globalisation to date have focused on leading transnational tobacco companies (TTCs) (Lee, Eckhardt, & Holden, 2016). Most notable has been the domestic restructuring of the industry, as a whole, and of individual firms. The CNTC undertakes central planning, manages raw materials, sets regional production quotas for leaf and products, and is the umbrella company for provincial firms. It is owned by the Chinese government and enjoys… While the Chinese tobacco industry is likely to remain, in the medium term, primarily dependent on its huge domestic market of 350 million smokers, indicators suggest the emergence of a new Chinese TTC in the next decade. By closing this message, you are consenting to our use of cookies. Registered in England & Wales No. For example, RJR licensed the Xiamen Cigarette Factory to produce Camel cigarettes in 1980 (Lin, 1984). By China National Tobacco Corporation. Our more than 1,000 crews provide oilfield services in 55 countries. The findings of this paper suggest, however, that the Chinese industry has been steadily positioning itself to become a global player since the late 1990s. The State Council issued the "Rules on Tobacco Monopoly" in September 1983, setting forth the national tobacco monopoly system officially. No potential conflict of interest was reported by the authors. Tobacco was brought to China by trading merchants during the sixteenth century. The paper adopts the framework set out in Lee and Eckhardt (2016) to organise and analyse the factors assessing the global business strategy of CNTC including the key factors driving the strategy, key tactics used, and the extent to which the company has succeeded to date. Similarly, CNTC Director Xun Xinghua declared that the industry was ‘seizing all opportunities to expand and occupy foreign markets’ (Anon, 1993). Structure of the Chinese tobacco industry. Below, the same research outputs are grouped by subject. This restructuring supported the STMA’s vision of fostering ‘large-scale enterprises, big brands and large markets’ (Zhou, 2004). Provincial governments also introduced protectionist measures in the 1990s, including near monopolies, to protect local companies regardless of productivity and efficiency (Wang, 2009). Given potential erosion of domestic market share, as in Japan and Taiwan, along with China’s signing and later ratification of the Framework Convention on Tobacco Control (FCTC), firmer plans were made to ‘make up for domestic losses overseas’ (Zhou & Cheng, 2006). Chinese-language secondary literature (dissertations, articles and industry reports) was identified through the China Knowledge Network. In 2008, CNTIEG became China Tobacco International (CTI), focused on supporting ‘CNTC’s strategic need to “go global”’ (Wang, 2008). China, COVID-19 Impact and Recovery Analysis | Tobacco Market Procurement Intelligence Report Forecasts Spend Growth of over USD 190, COVID-19 Impact and Recovery Analysis | Tobacco Market Procurement Intelligence Report Forecasts Spend Growth of Over USD 190, Tobacco Transformation Index Finds Most of the 15 Largest Tobacco Companies are Failing to Advance Harm Reduction, Conflicts Among State-Owned Global Tobacco Companies and Governments Impede Tobacco Control Efforts, Burden of COVID-19 on the market & rehabilitation plan | Tobacco Market 2019-2023 | Demand for Smoking Tobacco Products to Boost. Third, CNTC is an ‘efficiency seeker’, setting up overseas operations in key strategic areas to target-specific markets. Having oil and gas assets and interests in over 30 countries, CNPC is playing a greater role globally as the world’s 3rd largest oil company. Shanghai Tobacco is opening a distribution centre in Singapore, with initial duty-paid target markets of Indonesia, Malaysia, Philippines and Singapore, and select duty-free markets within the region (CTI, 2014b). The Chinese Government largely controls China’s tobacco sector and limits the investment of foreign manufacturers in China. Shanghai City, China - Participated in a project about designing an automatic package flow line Table 2 lists CNTC’s portfolio of foreign operations which include distribution offices, manufacturing plants, production and distribution bases, tobacco leaf procurement, and machinery and accessory materials. Further reforms under discussion include reduced political involvement from the commercial side of the industry, as opposed to its regulation and administration, and even privatisation (Liu, 2014; Wang, 2015). The state monopoly China National Tobacco Corporation (CNTC) is the fourth largest Chinese company in terms of profit (Li, 2012), employing 510,000 people across 33 provinces (China Tobacco, n.d.), and contributing 7–11% of government tax revenues annually (Han, 2013). China National Tobacco Corporation. Market share grew, from 6% in 2007 to 25.2% in 2014, the only segment to see growth in 2014. The major reason as to why CNTC entered into joint venture with the U.S Company called Celanese Fibre Corporation was to seek partnership in … This analysis shows that the ‘go global’ ambitions of the Chinese tobacco industry have been spurred by both internal and external forces. Recommended articles lists articles that we recommend and is powered by our AI driven recommendation engine. Structural reforms, described as ‘grasping the large and letting go of the small’ (Wang, 2009), were introduced to boost efficiency, productivity and product quality. The industry is likely to remain state-owned and controlled for the foreseeable future. Over the past 60 years, the CNTC has been focused on supplying a huge domestic market. For example, Yunnan Tobacco would target Southeast Asia (Zhu & Tian, 2007). In 2008, a ‘merger of two giants’ occurred between Yunnan’s Hongyun and Honghe Groups, forming the Hongyun Honghe Tobacco Group. The industry anticipated change following WTO accession. Total number of Chinese tobacco companies (1998–2009). The higher volume in illicit tobacco sales also has a negative effect on public health as the quality of counterfeit tobacco products is questionable. The overall vision of provincial reforms has been to establish a three-tiered system, with municipal factories becoming subsidiaries (with legal authority) or branches (without legal authority) of provincial industrial companies, and the latter acting as CNTC subsidiaries (Liu, 2006). The domestic industry grew rapidly, with the building of many small factories, increasing annual cigarette production on average 11% annually between 1949 and 1958 (Benedict, 2011). Global market leader Philip Morris’ IQOS brand and other products that heat tobacco instead of burning it are banned in China, where state monopoly China National Tobacco Corp. accounts for nearly all tobacco sales and generates important tax revenues for the country. CNTC annual production and export in billions of sticks (1980–2013). And county levels over many decades and Practice 2001 ( Table 1 ) in 1981 to manage the provincial... With many tailored to key markets ( Feng, 2014a ) Corporation, trading as China Tobacco, Chinese. Consumer product company based in Beijing growth is likely to remain state-owned and controlled the. Was dramatically reduced, to improve economies of scale and enable marketing abroad 2009, this reduced... 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