Tobacco sector reports steady growth
By Zhang Lu (China Daily)
Updated: 2004-07-09 21:49

China's tobacco industry kept up steady economic growth in the first half of the year, officials from the State Tobacco Monopoly Administration (STMA) said on Friday.

"Production and demand for cigarettes achieved a balance for the first six months," said Hu Xinhua, deputy director of STMA's general office.

STMA statistics show 947.14 billion cigarettes, or about 19.09 million cartons, were sold from January to June, up 5.1 per cent over the same period last year.

The country produced 18.9 million cartons of cigarettes, 2.9 per cent more than from January to June last year.

By the end of last month, about 2.5 million cartons of cigarettes were in storage, 496,000 cartons less than last June.

"Famous brands and key enterprises in the industry achieved strong growth during the period," Hu said.

In the first half of the year, production and sales of the 36 top brands had a year-on-year growth of 22.4 per cent and 34 per cent, respectively.

The figures for the 36 key cigarette manufacturers were up by 4.4 per cent and 5.6 per cent, respectively.

With the steady growth, the industry made over 100 billion yuan (US$12 billion) in pre-tax profits in the six-month period.

The number nearly equaled the total for 2002, Hu said.

The government has been working to ensure that tobacco leaf supplies could meet demand this year.

To date, 3.652 million purchasing contracts have been signed, with a contracted planting area of about 1 million hectares.

"The industry also made progress in fighting the production and sale of counterfeit and shoddy tobacco products," Hu said.

During the first six months, 124,000 such cases have been uncovered, meaning about 51,400 cartons of counterfeit cigarettes have been confiscated and 1,188 illegal production sites closed down.

Meanwhile, the restructuring of China's tobacco industry has been progressing smoothly, Hu said.

From January to June, five company mergers were completed, and three inefficient factories were closed.

Through the industry's restructuring over the past two to three years, China now has about 80 tobacco enterprises.

In 2001, the total stood at 185. More than 90 of them had a small annual production capacity of less than 100,000 cartons.

The administration plans to close all small producers by the end of the year, STMA spokesman Xing Wanli said.

"We have set a goal of establishing some 50 key enterprises through mergers and acquisitions in three to five years, and building up some 100 famous brands out of the more than 300 brands that exist at the moment, in two years," he said.

Creating key enterprises and big brands will help the domestic tobacco industry deal with competition from foreign counterparts, Xing said.

China lowered its import tariff on leaf tobacco to 10 per cent this year from the original 40 per cent, and reduced the tariff on cigarettes from 36 per cent to 25 per cent, according to its World Trade Organization commitments.

The industry also strengthened the development of its technology, lowering the tar content to decrease the negative side effects of smoking.

The STMA has been promoting the concept of Chinese-style cigarettes, which have a lower tar content.

Meanwhile, a modern logistics network has been created to cover 36 major cities of the country.

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