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China Opens up to Foreign Tobacco Producers
Foreign tobacco producers are preparing to compete for a bigger slice of China's cigarette market - the largest market in the world for "cancer sticks" - as the government reduces barriers on the industry in line with commitments made during the country's bid to join the World Trade Organization.

South Korea's largest tobacco manufacturer, Korea Tobacco & Ginseng Corp., which produces 100 billion cigarettes a year, said yesterday that it is starting to sell its brands in several big Chinese cities, including Beijing, Shanghai and Guangzhou, following a successful one-year market test in Shenyang, capital of Liaoning Province.

The company introduced its mid-to-low-end Esse brand cigarettes, priced at nine yuan (US$1.8) per package, to target trendy young smokers.

Meanwhile, British American Tobacco Plc., the world's second-largest tobacco producer and marketer, is reportedly in talks with the Chinese government to form the country's biggest tobacco joint venture in Sichuan Province.

"Although the country will not give up its tobacco monopoly within the short term, the entry threshold is to be lowered in various aspects. More foreign players will feel ready to enter," said Qu Meiyu, director of the industry development division of China's State Tobacco Monopoly Administration.

At present, foreign tobacco producers, who want to export cigarettes to China, must apply for a quota, which are issued twice a year, in May and October, by the Chinese government. On top of that, only a limited number of domestic distributors are awarded with licenses to sell overseas cigarettes.

According to Qu, the government will gradually increase the import quota and cancel the special license within two years.

In addition, tariffs im-posed on imported tobacco leaves will be cut from the current 40 percent to 17 percent by 2004. Currently, the tarrif on cigarettes is 36 percent. That number is expected to drop, but the government has not announced how much that rate will be cut in the future.

China imported 3.34 mil-lion cartons of cigarettes, worth US$12.4 million, during the first seven months of this year. Every year, around 33 million cargo containers - each with 50,000 cigarettes - are sold in China.

(eastday.com September 14, 2002)

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