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). Source: Compiled from BAT (2013), CTI (2014a), CTIEC (n.d.), Hongta Group (2010), MOFCOM (2015), Namibia Oriental Tobacco (n.d.), STMA (2006), STMA (2009, 2012), Tobacco-free Kids (2010), United Castle America (n.d.) and Zhejiang Tobacco Industrial (2015). By comparison, Philip Morris International, its … This policy was named the ‘Go Global’ strategy in 2000 (CCPIT, 2007). 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. 3099067 The foreign operation produces brands of the respective parent companies or licensed production of other companies. Future growth is likely to come from population growth and increasing female smoking rates (currently 2.4% for adult females). The industry’s focus on expanding overseas production is expected to continue, encouraged by favourable government policies (Feng, 2014a). TTC hopes that these agreements would lead to greater market access were disappointed in 2006 when the government announced a ban on all new manufacturing facilities, including JVs with foreign companies, as part of stronger tobacco control measures (Ding, 2006). Mid-priced products saw modest growth, while the economy segment fell dramatically from 59.7% to 28.3% during the same period (Euromonitor, 2013, 2015). The China National Tobacco Corporation (CNTC), which produces one-third of the world’s cigarettes, is the largest tobacco company in the world. In 2003, STG and Gallahers signed reciprocal trademark license agreements and, the following year, launched each other’s brands in China and Russia (Gallaher, 2004). To understand the global business strategy of the Chinese industry, we searched the websites of the CNTC (http://www.tobacco.gov.cn), and industry news sites, Tobacco China (http://www.tobaccochina.com), Tobacco Market (http://www.etmoc.com) and China Tobacco (http://www.echinatobacco.com). In 2004, STMA announced plans to limit mid- and higher-priced brands to one hundred within three years (STMA, 2004). Formally separate entities, in practice the CNTC and STMA are ‘one institution with two name plates’ (STMA, 1997) governing the industry through a vertical bureaucracy (Wang, 2009). The China National Tobacco Corporation was founded in January 1982. 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). CNTC annual production and export in billions of sticks (1980–2013). View more. In 2004, sixteen industrial companies were established (Li, 2006). Parent agency: State Council of the People's Republic of China: Website: www.sasac.gov.cn With annual sales of over 4 million cases, Hongyun Honghe is the world’s fourth largest by sales volume after PMI, BAT and Japan Tobacco International (JTI) (Anon, 2008). For instance, Viniton Group and Lao Liaozhong Hongta Fortune Tobacco have established production and distribution bases in Southeast Asia. People also read lists articles that other readers of this article have read. 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). The industry lynchpin is China National Tobacco Corp., a state-owned monopoly that makes more than one-third of the world's cigarettes, and … The primary and secondary data sources were compiled into a chronological narrative according to these three questions. Seeking to further decrease operational costs for greater profit margins, CNTC’s overseas operations strive to use locally grown tobacco leaf and hire locals where possible, thereby increasing efficiency through removing cultural and language barriers. BAT was required to leave China in 1953 given the industry’s nationalisation following establishment of the People’s Republic of China (Lee, Gilmore, & Collin, 2004). China National Tobacco Corporation (CNTC)is a state owned Chinese company and the biggest cigarette corporation of the world. Source: Compiled from UN Comtrade Database (2015). By China National Tobacco Corporation. In 2011 the first annual meeting on tobacco market expansion was held which adopted a three-step strategy for export growth: (a) market entry and establishment of a distribution network; (b) licensed production by local manufacturers; and (c) establishment of local production facilities (Ju, 2011). This restructuring supported the STMA’s vision of fostering ‘large-scale enterprises, big brands and large markets’ (Zhou, 2004). Our more than 1,000 crews provide oilfield services in 55 countries. Over the past 60 years, the CNTC has been focused on supplying a huge domestic market. The State Tobacco Monopoly Administration was established in January 1984. However, the industry was also highly uncoordinated, controlled at the provincial level by local monopoly offices reporting to ministries of light industries, commerce and other financial entities (STMA, 1997). Shanghai City, China - Participated in a project about designing an automatic package flow line Hover over the donut graph to view the FC output for each subject. China National Tobacco Corporation operates as a tobacco company. Lacking its own networks, JVs were formed with TTCs to produce and distribute Chinese cigarettes abroad (CTI, 2014a; Zhang & Zhang, 2013). 55 Yuetan South Street No potential conflict of interest was reported by the authors. Importantly, FDI has been coordinated to minimise competition among Chinese companies on the global market (CTI, 2014c). China tobacco imports [data file], 2016. The China Tobacco Yearbook (1981–2014) was reviewed for information on key strategies and annual industry performance. Source: Compiled from Liu and Ren (2009) and STMA (2000, 2002, 2003, 2005, 2006). In 2008, CNTIEG became China Tobacco International (CTI), focused on supporting ‘CNTC’s strategic need to “go global”’ (Wang, 2008). 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). If even partially realised, the global ambitions of the Chinese tobacco industry will have profound impacts for public health. The China National Tobacco Corporation (CNTC), which produces one-third of the world’s cigarettes, is the largest tobacco company in the world. CNTC has been exporting since the 1980s, but the scale and reach of exports since the late 2000s suggests a more concerted strategy. This initiative refers to the extension of the so-called Silk Road Economic Belt, linking western China with Europe through Central Asia, to the new Maritime Silk Road from China’s southern coast to Europe via North Africa and Southeast Asia (Knowler, 2015). 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. He envisioned the establishment of overseas companies and diversification into non-tobacco sectors (Huang, 1993). In 2014, the share of revenue contributed by foreign-funded enterprises (including those from Hong Kong, Macau and Taiwan) is expected to be only 0.1% of the industry’s total. The resultant structure potentially dwarfs existing TTCs and serves as a springboard for globalisation. 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). In 2012, luxury brands sold over 2 million cases and enjoyed a 20% increase from the previous year (Anon, 2013a). This analysis shows that the ‘go global’ ambitions of the Chinese tobacco industry have been spurred by both internal and external forces. 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). In 2013, consolidation had reduced cigarette brands from around 2000 in the late 1990s to 90 (Figure 3). These are likely to appeal to overseas Chinese, rather than serve as global brands, given their close affinity with Chinese cultural tastes and practices. Figure 1. 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). Xicheng District Tobacco use kills nearly half a million Americans and costs the nation about $170 billion in health care bills each year. In Michigan, the annual toll is more than 16,000 deaths and over $4.5 billion in health care costs. Latest News. In 2013 it manufactured about 2.5 trillion cigarettes. Externally, following WTO accession in 2001, it was anticipated that market opening would bring greater foreign competition like in other Asian countries. Faculty of Health Sciences, Simon Fraser University, Burnaby, Canada, Note: The CNTC and STMA also manage other tobacco-related entities including leaf, machinery, accessory materials, research institutes, technology centres and tobacco museums, China Council for the Promotion of International Trade. We sought information on industry restructuring, mergers and acquisitions (M&A), joint ventures (JV), foreign direct investment (FDI), target markets and product development. Between 1998 and 2009, this consolidation reduced the number of companies to one-sixth (Figure 2). In 2003, the Beijing Cigarette Factory split from Beijing Tobacco Company to merge, along with the Tianjin Cigarette Factory, with the Shanghai Tobacco Group (STG) (Zhou, 2004). A ‘long-term strategic cooperative partnership’ with PMI agreed in 2005 involves licensed production and distribution of Marlboro in China, and the establishment of jointly-owned China Tobacco Philip Morris International (CTPMI) to launch and distribute Chinese brands in foreign markets. China National Tobacco Corporation operates as a tobacco company. This article is part of the special issue ‘The Emergence of Asian Tobacco Companies: Implications for Global Health Governance’. For example, the removal of provincial protectionism allowed provincial manufacturers to sell their brands nationally, fuelling domestic competition and, in turn, product and brand development, and the expansion of successful companies (Wang, 2009). First, historically, a large number of Chinese companies manufactured thousands of local brands at many different price points (Anon, 2014). Leaf cultivation was firmly established by the mid-1800s, and smoking from the late nineteenth century with the automation of cigarette manufacturing. 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). One case contains 50,000 sticks of cigarettes. Based in Switzerland, CTPMI launched three so-called ‘heritage brands’ (RGD, Dubliss, and Harmony) in 2008, using PMI’s distribution networks in Central and Eastern Europe and Latin America (Tobacco Free Kids, 2010). Source: Compiled from STMA (1996–2014). These remaining brands held larger domestic market share. Number of CNTC brands (1990s–2013). The CTIEC targets Europe, while United Overseas (Panama) produces Chinese brands for the Americas (CTI, 2014, 2014c). 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