October 20, 2016
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No country in the world has as big a cigarette industry as China. This is the story of how a giant state-backed monopoly created the industry, which provides more tax revenue than any other, and ultimately sabotaged the country's anti-smoking efforts in the process.
Over the past two decades, global tobacco use has declined by 11%. In China, that number is only 1%. China, which accounts for one-fifth of the world's population, consumes nearly half of the world's cigarettes — more than 2.4 trillion a year. That's more than the next 67 countries combined.
Why is China's smoking epidemic so difficult to contain? How does the Chinese tobacco industry function? How do the people who grow tobacco survive under the monopolistic system that permeates the supply chain?
In 2019, Chongqing, with a population of 32 million, was planning to follow in the footsteps of several other major cities and introduce legislation to ban smoking in all indoor public places. But then, things took a turn for the worse.
In August 2020, Zhang Jianmin, general manager of the China National Tobacco Corporation (hereafter named as China Tobacco) and director of the State Tobacco Monopoly Administration, visited the Chongqing party secretary and mayor. A month later, when the world's most populous city formally enacted its tobacco control regulations, it gave the tobacco industry a "green light" — allowing restaurants, hotels, bars and karaoke establishments to set up smoking areas, even though this was clearly contrary to the requirement that indoor areas be completely smoke-free.
Since then, smoke-free legislation at the city level in China has come to a virtual standstill.
Twenty years ago, China joined dozens of other countries in signing the World Health Organization Framework Convention on Tobacco Control, the only international convention in the health sector aimed at curbing the influence of the tobacco industry and reducing global smoking rates.
After 20 years, tobacco consumption in China remains virtually at the same level. Chinese tobacco companies continue to increase cigarette production. More critically, the tobacco industry has blocked the introduction of national smoke-free legislation. This measure would both protect China's large population of non-smokers from secondhand smoke and socially discourage people from endorsing smoking.
There are more than 300 million smokers in China. Although officials have not released accurate data on tobacco-related deaths, health experts agree that at least 1 million people die from smoking-related diseases every year in the country.
At weddings, people will give "red happiness" cigarettes as a gift.
From 2005 to 2020, had China's smoking rate declined at the same pace as the world average, the number of tobacco users in China would have been about 80 fewer today. No country in the world consumes more cigarettes than China. It sells more than 2.4 trillion cigarettes every year, accounting for about 46% of the global total. Cigarettes are almost everywhere. A 500 yuan ($68) "panda cigarette" is one of the most popular gifts given to VIPs and high rank customers.
Visiting relatives during the Spring Festival and sending red Chinese cigarettes is a dignified and practical choice. At weddings, people will give "red happiness" cigarettes as a gift. Even in the middle of the round tables at a banquet, there is often a plate of cigarettes for guests.
Xi Jinping tried to curb the power and growth of Chinese tobacco companies in the early days, including entrusting the research team of the Central Party School to write a highly critical report on the tobacco industry, characterizing tobacco as China's "number one killer" and promising American philanthropist Bill Gates to promote tobacco control. However, China Tobacco remained successful despite these efforts.
More recently, the change in China's political situation has made it more difficult for public health experts to fight against China Tobacco. After all, criticizing the company is equivalent to criticizing the Chinese government.
Photograph taken during traditional Chinese wedding
Thomas Sauvin / Instagram
According to Euromonitor International, a market research company, 19 provincial tobacco subsidiaries of China Tobacco control 96% of the market in China. Together they sell more cigarettes every year than any other company – or country.
A giant state-owned enterprise, China Tobacco has interests in a series of businesses, from pharmaceuticals and mineral water to automobile repair and advertising. In addition, it holds major shares in China Pacific Insurance Company, Oriental Securities, and four of China's top 10 banks, and owns luxury hotels in Shanghai, Changsha and Kunming.
The company manages the entire tobacco supply chain in all major cities in China. It sets quotas for tobacco growers, issues licenses to thousands of cigarette retailers, and controls which truck drivers are given permission to transport tobacco products. Its officials also hunt down cigarette counterfeiters, and after more than a decade of relentless efforts, they wrested the management of China's e-cigarette industry from the private sector, removing another source of competition.
Helping the government build warships with cigarettes.
The company is also entering the international market, trying to expand its business in emerging markets in developing countries, selling all kinds of new cigarettes and e-cigarettes. In July 2022, the global tobacco industry monitoring program STOP (Stop Tobacco Organizations and Products) reported that 23 brands of China Tobacco are being sold all over the world.
Currently, the Chinese tobacco industry employs nearly 550,000 people. In 2022, the average annual salary of employees in the tobacco industry was a whopping 186,700 yuan ($25,549).
That year, China Tobacco generated 1.44 trillion yuan ($197 billion) of revenue for the Chinese central government in profits and taxes, accounting for 7% of the government's fiscal revenue that year, almost equivalent to China's defense budget (1.45 trillion yuan). Some people joked that they were "helping the government build warships" with cigarettes.
China Tobacco is also a "piggy bank" for China's central and local governments — it is the main investor in the Chinese government's $45 billion semiconductor development plan (known as the "big fund"), and has helped Xi Jinping's "Belt and Road" initiative.
The office building of China National Tobacco Corporation in Beijing is located in the city's administrative center that also houses powerful central departments, such as the Ministry of Finance and the National Development and Reform Commission. A survey found that China Tobacco has strategically prevented, delayed, and influenced the implementation of the smoking convention in China. It has used its economic strength and status as a government agency to weaken China's public health policy and influence several important Chinese leaders.
Ray Yip, an epidemiologist who led the Bill and Melinda Gates Foundation's business in China, said, "It's like a football game. They are both the players and the referees."
According to historian Sherman Cochran, at the end of the 19th century, when American tobacco tycoon James Duke learned of the invention of the automatic cigarette machine, he looked through an atlas and noticed the large population of China, and then said, "This is the place where we want to sell cigarettes."
In the late 1990s, the Chinese government was committed to restoring relations with the West and actively striving to join the World Trade Organization. The top priority was to improve China's reputation as a responsible power, which is why Beijing hosted the World Conference on Tobacco and Health in 1997.
However, shortly before the meeting, China Tobacco sent a letter to some government agencies. A public health and tobacco control expert received a note saying that the evidence on the health risks of smoking was "controversial", and that "many smokers live longer." China Tobacco also pointed out in the letter that "tobacco is the highest source of tax for the government", and that 200 million farmers grow tobacco. After the Geneva Conventions were signed, many rules surrounding tobacco usage around the world had changed. These rules were met with harsh criticism globally, especially in China. One rule included changing the warning information on cigarette packs.
China Tobacco strongly opposed the change, especially adding warning pictures showing adverse health effects of smoking, such as diseased lungs. They argued that since traditionally cigarettes were essential consumer goods during special occasions such as festivals, parties, celebrations, and weddings, printing graphic health warnings would put off customers.
China Tobacco had an unmatched advantage at the Convention — its executives were full members of the Chinese diplomatic delegation to the World Health Organization's Geneva meeting, and actively participated in negotiations, sometimes sitting side by side with the head of the Chinese delegation. In the end, the company submitted a total of 128 recommendations to other departments of the Chinese government in order to change how the convention rules apply to them, such as making China Tobacco in charge of branding and warnings.
It should be noted that China is not the only one seeking ways to weaken the Convention: Japan, the United States and Germany are also regarded as countries that protect their tobacco industry. The United States was enthusiastic about the Convention during the Clinton administration, but changed its policy during George W. Bush's presidency, becoming one of the few countries that participated in negotiations but failed to ratify the Convention. All four countries won the "dirty ashtray award" from the Alliance of Anti-Tobacco Organizations for breaking the Convention.
The final text of the Convention was agreed in May 2003. It was weaker than many tobacco control advocates hoped for, but was still seen as an important step forward. The core provisions of the Convention include a series of effective smoking reduction strategy — such as regulating health warnings, a national smoke-free legislation, a comprehensive ban on advertising, and a ban on misleading marketing of so-called "healthier" low-tar cigarettes.
However, there is no meaningful deterrent for countries that do not comply with the Convention. Consequently, even after the text of the Convention was confirmed, China Tobacco's efforts to weaken the Convention have not stopped. They downplay documents by foreign anti-tobacco organizations — negotiations on the Convention are conducted in English, even though like other Conventions, it is translated into Chinese and other working languages of the United Nations.
Employees of China Tobacco have played a key role in the so-called "proofreading" work of such conventions, making dozens of modifications to the Chinese translations of the documents produced, all of which are reflected in the final Chinese version published on the United Nations website. China Tobacco successfully replaced many stronger English words to softer Chinese ones. For example, the English word "should" was translated to "appropriate" in Chinese, to soften the severity of the Convention’s rules.
The Geneva-based secretariat of the World Health Organization Framework Convention on Tobacco Control said that these translations were carried out before the establishment of the secretariat. "We are not sure whether past staff are aware of possible problems," a spokesman said in a statement. The spokesman also mentioned the language in international law, pointing out that both the English and Chinese versions of the convention are "equally authoritative".
Hong Kong - A cigarette bud is discarded on the rubbish bin with torn up anti-smoking campaign sticker.
Liau Chung-ren / ZUMA
China is not the only country that has been tripped by the economic strength of the tobacco industry. In the United States, the political influence of tobacco companies has stalled reforms for decades. Several countries in Asia and the Middle East, including Indonesia and Turkey, are as bad or even worse with tobacco control than China.
But the world's expectations for China are different: first, because of China's huge smoking population; and second, because of the looming presence of China Tobacco, a huge monopoly. China is both the biggest victim of the tobacco industry in the world and the biggest culprit.
There is a deep conflict of interest inherent in the existence of China Tobacco – which is both a cigarette manufacturer and a maker of tobacco control policies. And the government knows it.
In a 239-page report on China's tobacco control strategy, the government research team calls tobacco China's "number one killer", and the tobacco industry "poison". The report advocates for the enactment of a national smoke-free law and calls for major reforms in the tobacco industry, including separating the commercial operations of tobacco companies from their regulatory roles and ending state monopolies.
In the first few years of the Convention's decisions coming into force, the central government raised the consumption tax on cigarettes and asked for text warning labels on cigarette boxes. But these measures had little impact on China Tobacco.
In the six years since the implementation of the Convention, the company's cigarette production has increased by an average of 82 billion units per year. The profits and taxes contributed by the company to the central government increased by an average of 20% per year.
China's public health community expressed disappointment at this. In 2010, a team of Chinese and international tobacco control experts concluded that the country's tobacco control apparatus is weak, and there is a "huge gap" between its performance and its obligations under the Convention.
In 2013, Xi Jinping became President of the People's Republic of China. Some thought that this would provide an opportunity for greater tobacco control. This was partly because when Xi was vice president of China and the president of the Central Party School, the latter had written a harshly worded report on China's tobacco policy.
Xi used to be a smoker, but quit smoking about 20 years ago
Furthermore, Peng Liyuan, Xi's wife, worked as a tobacco control ambassador in 2009 with the encouragement and support of her husband.
Yip Ray, the former chief representative of the Gates Foundation in Beijing, became friends with Peng while working in China and knew her interest in tobacco control issues. Bill Gates is also personally interested in tobacco control. According to Ye Lei, former head of the Gates Foundation's China Project, in May 2012, when Xi was the vice president of the country, Peng arranged for the two to meet in Beijing.
"At that meeting, Gates told Xi Jinping that China should pay more attention to tobacco control." At that time, Ye Lei was also present, and he recalled, "Xi Jinping was quite positive about tobacco control. He said, 'I agree with you, it is not good for the country.' He also said, 'I used to be a smoker, but I quit smoking about 20 years ago, and I feel much better [now].”
Ye Lei recalled that Xi told Gates that he believed that the economic losses and harm to public health caused by tobacco were considerable. The two talked for a longer time than originally scheduled.
When he said goodbye, Xi held Gates's hand. “I will do something when the time is right," he told Gates.
In addition to the meeting with Xi, the Microsoft co-founder and Peng Liyuan attended an event together, and in a photo, Gates and Peng stretched out a palm forward to signal "rejection". They wore bright red T-shirts with Chinese characters that said, "I don’t smoke". The photo has since been used in a few tobacco control activities and advertising.
However, a year later, just a few months after Xi took office as president, Li Bin, then director of the National Health and Family Planning Commission, ordered the deletion of the first lady's photo from the event. Several activists in China said that it was Peng's last appearance in the tobacco control campaign, although she continued to promote AIDS prevention and control.
Hefei, Anhui, China: Young children say No to tobacco and electronic cigarette to welcome the World No-Tobacco Day
Tpg / ZUMA
Nevertheless, Xi Jinping did partially fulfill his promise to "do something" to control tobacco.
From 2013 to 2018, the Chinese government issued a series of directives aimed at reducing smoking rates, including banning government officials from smoking in public. The ban originated from a local inspection by Wang Longde, former deputy minister at the Ministry of Health. He found that many officials smoked in conference rooms. After returning to Beijing, Wang joined more than 40 academicians to write to the Central Committee and received instructions from Xi.
In 2015, Beijing banned smoking in restaurants, hotels, railway stations, hospitals and other public places. This was also the earliest local legislation in China to implement indoor smoke-free laws in accordance with the Convention. Beijing hired 1,100 "non-smoking supervisors" wearing red armbands to ensure the rule was followed.
That same year, the Chinese government raised the cigarette tax again and effectively increased the retail price of cigarettes by 11% on average, which was the first substantial tax increase since the entry into force of the Convention. That year, Chinese tobacco sales fell by nearly 8%.
In the following years, tobacco control organizations actively cooperated with local governments to pass comprehensive smoke-free laws in accordance with the Convention in Shanghai, Shenzhen, and several other small and medium-sized cities.
In 2014, the State Council issued a draft nationwide smoke-free legislation, which prohibited smoking in indoor public places and required large graphic warnings to be marked on cigarette packaging. The World Health Organization called this draft law a "qualitative leap", adding that if fully adopted, it could "save millions of lives".
Although tobacco has contributed richly to the government, smoking-related diseases have also caused huge economic losses to China. In 2015, lung cancer caused by smoking alone caused a loss of $5.2 billion to China, and these costs are expected to rise.
They said we were trying to destroy Chinese tobacco companies and allow foreign companies to enter the Chinese market
The adoption of legislation by the State Council of China requires the signature and consent of all government departments. However, China Tobacco and the Ministry of Industry and Information Technology rejected this request and, in fact, rejected the legislation. According to a Chinese public health advocate who has discussed the draft law with China Tobacco, tobacco monopolies believe that the harm of smoking is exaggerated and claim that the national ban on smoking in indoor public places is too "extreme".
"They said we were trying to destroy Chinese tobacco companies and allow foreign companies enter the Chinese market," the person said.
China Tobacco has a history of issuing political threats against tobacco control advocates. As early as when it participated in the Convention negotiations, an official from China Tobacco pointed at Ministry of Health officials and scolded them: "Do you want to control smoking? I tell you, this is a betrayal. You are civil servants, and one-tenth of your salary comes from our money.”
In 2012, China Tobacco claimed that non-governmental organizations engaged in tobacco control in China were being "manipulated by foreign investors and multinational tobacco companies in an attempt to bring down China's tobacco enterprises and spread the trend of Western liberalization in the name of tobacco control."
At the end of 2020, the western Chinese city of Xining successfully passed a comprehensive smoke-free legislation. According to two sources working in tobacco control, China Tobacco's response to Xining's legislation was to fire the city's tobacco director. After Xining, even though some local governments used administrative means to issue weaker prohibitions, no other local legislatures passed comprehensive smoke-free laws.
Due to systematic pressure, tobacco bureaus around the country have also begun to act more, using all means to intervene in the introduction of urban smoke-free legislation. In June this year, China Tobacco issued a legislative recommendation to officials in the city of Anhui, who are considering smoking being banned indoors, warning that "smoking control" is an acceptable target, but "no smoking" is not.
Since then, China Tobacco has increased its funding for the construction of "civilized smoking areas" – in indoor places such as government buildings and shopping malls as well as in parks, bus stations, and tourist attractions.
"We believe that because it is objectively difficult to implement a complete ban on smoking in public places, setting up independent smoking areas or indoor smoking rooms in public places can achieve civilized smoking," the Tobacco Monopoly Administration said in a 2018 statement to Reuters.
In 2023, no city in China has passed smoke-free regulations. A public health advocate said, "They have found a way to deal with smoke-free laws. We are helpless now.
Zaozhuang City - Pupils show cigarette models on which they wrote many slogans to call upon people to quit smoking at a primary school.
Xinhua / ZUMA
An important reason why China Tobacco has the upper hand in the legislative game is that China's political authority has greatly curtailed freedom of speech and expression on a series of issues, including tobacco control, which were previously considered relatively uncontroversial.
The media in mainland China have in the past published sharp criticisms of Chinese tobacco. But now they are more restrained. In addition, due to the change of the political situation, China's health department is increasingly defensive about international funds and institutions with international backgrounds, and is considering terminating or rejecting some tobacco control funding projects. This will be a blow for China's domestic tobacco control organizations.
A public health advocate said: "China is becoming a more authoritarian country, and the role of civil society is getting smaller and smaller. Because of this, China tobacco has a greater voice and more opportunities." The situation is not likely to change in the next few years, unless there's a wholesale change in the political climate.
In addition to smoke-free legislation, other strategies outlined in the Convention were largely sidestepped. Although the Convention recommends restricting consumption through a tobacco tax, China's cigarette prices are the lowest in the world. The fall in consumption caused by the tax increase in 2015 lasted for only two years. Since 2018, China's cigarette production has been on the upswing for five consecutive years.
As for the warning labels on cigarette boxes, China Tobacco still has the right to set its own standards. They choose vague warnings, such as "smoking is harmful to health". And for many brands, the color scheme integrates the warning and the packaging background.
The Convention requires member states to enforce the prohibition of tobacco sales to minors. However, a survey of 4,900 junior high school smokers and students in China in 2019 found that more than three-quarters of seventh- to ninth-grade students have bought cigarettes in the past month.
China Tobacco is increasingly formulating policy interventions without any control.
In 2021, China Tobacco obtained the right to regulate e-cigarettes as expected — in China, the e-cigarette market is dominated by private companies. The following year, China Tobacco banned the sale of fruit-flavored e-cigarette products, but fruit-flavored beaded cigarettes are still on the market. Chinese tobacco knows that these flavors are attractive to teenagers and can help cultivate new consumer groups.
The company still takes the sale of so-called "low-hazard and low tar content" cigarettes as its core business, and has invested hundreds of millions of dollars in "tobacco science" research. Significantly, it marked the tar content on the cigarette boxes and sold a few brands containing Chinese herbs such as ginseng and osmanthus.
China's public health officials and tobacco control organizations have been swept aside, while China Tobacco is increasingly formulating policy interventions without any control.
Since 2019, China's cigarette sales have been increasing every year. Euromonitor predicts that although China's population is decreasing, cigarette sales will continue to grow at least until 2027.
As with many important issues in China today, only one person can change things. Ye Lei, the former Gates Foundation executive, said, "Only Xi Jinping can stop that momentum."