The 13th World Conference on Tobacco OR Health

Objective: China is the largest producer of cigarettes in the world, but little is known about the Chinese tobacco agriculture and cigarette manufacturing sectors. This session presents three papers on the economics, organization, and changes in these sectors.

Methods: These papers are based on analyses of published China central government statistics and over 1,000 tobacco farm household interviews in the three largest tobacco leaf producing provinces. Teh-wei Hu will present “The economic organization of tobacco agriculture and cigarette manufacturing in China,” Zhengzhong Mao will present “Tobacco farming and government policy in China,” and Elisa Tong will present “The Transformation of China's Tobacco Industry with the WTO.”

Results: Tobacco production employment is small, 2% of the rural and 1% of manufacturing employment. However, tobacco production taxes provide 15.7% of local government revenue. Tobacco leaf accounts for less than 20% of tobacco farmer income, and other crops have higher returns than tobacco leaf. Local governments place quotas on farmers, even when there are low economic returns to farmers. Between 2001 and 2004, China has reduced the number of cigarette brands from 1049 to 423, and the number of regional cigarette companies from 185 to 57. Mergers and acquisitions that eliminated small companies and brands achieved these reductions.

Conclusions: China's cigarette manufacturing is consolidating to compete with multinational corporations. China's farmers would benefit from reduced production of tobacco but are hampered by government quotas.

Funding: 1 R01 TW05938. Tobacco Research Framework Program, Fogarty International Center, U.S. National Institutes of Health.