Economy

Why China Has So Many Smokers: Tobacco Lobby, Chinese-Style

The power of "Big Tobacco" in a state-run industry in China is surprisingly similar to the hold that U.S. cigarette makers long enjoyed. Indeed, Chinese anti-smoking advocates are decades behind Western counterparts.

Smoking in Shanghai
Smoking in Shanghai
Liu Jiaying and Zhang Jin

BEIJING â€" On Jan. 9, 2006 China signed the World Health Organization (WHO) Framework Convention on Tobacco Control. According to this international treaty, China had to ban smoking in all indoor public places and prohibit all tobacco advertising, promotion and sponsorship within five years so as to protect the public from the deleterious health effects.

China patently failed to comply with the provisions during the first five-year term. Now, as the second term is set to end, it's clear that we will again fall well short of the goals set by the convention.

According to a recent WHO project report, China has more than 300 million smokers. That is nearly a quarter of its population. Each year over 1.4 million Chinese smokers die of tobacco-related diseases while more than 100,000 people are killed by second-hand smoke.

Lack of a nationwide law

China still has no national law that effectively bans smoking in indoor public areas. Though something called "Implementation Rules on Public Places Health Management" exists, and China’s main advertising regulation mentions the prohibition of tobacco promotion in the mass media, at sport events and so on, since there is no clear definition of “public places” and no vigorous enforcement or punishments, all these regulations regarding tobacco control amount to very little.

Not only is China the world’s largest tobacco manufacturer and has the largest number of smokers, smoking still exists in 70% of workplaces and 82% of restaurants, while tobacco ads are omnipresent in Chinese people’s daily lives, according to the WHO report.

Up to now, a dozen of China’s big cities have enacted local tobacco control regulations. But these regulations do not meet the requirements of the WHO Framework Convention on Tobacco Control, nor is their enforcement ideal in the WHO’s estimation.

Panda cigarettes â€" Photo: Taiyo FUJII

Earlier this year, China’s Ministry of Finance and State Administration of Taxation finally undertook a two-pronged approach of raising the tax and the price of cigarettes. Meanwhile the Beijing municipality also enacted far stricter local smoke-free regulations. Some believe that China may be turning the corner in the effort to control tobacco.

Wu Yiqun, an activist in tobacco reform and the vice director of the Think Tank Research Center for Health Development, is not so optimistic. In comparison with other countries, she says China’s smoking control has a long way to go since the related measures remain only an oral appeal.

As the WHO report notes, only nationwide smoke-free legislation can reduce the number of smokers and protect the public from the ills of second-hand smoke.

A lurch forward

Alas, after 10 years, why is China still hesitating to take this step forward? Why can't the country come up with a national anti-smoking law? One official claimed that "the law involves complex issues, and research and feasibility studies continue to be required.”

China still has not joined the many countries that impose pictorial warnings such as damaged lungs or bad teeth on cigarette packets. Zhang Jianshu, president of Beijing Tobacco Control Association, pointed out that this kind of image would clearly discourage smokers. However, again, such a measure has to be imposed by the central government.

Wu Yiqun agrees that putting warning images on cigarette packages is the easiest, and most economical and effective tobacco control education measure. Besides, she stated, Chinese people have the custom of giving cigarettes as a present, so shocking pictures will be useful in changing this habit.

Unfortunately, such an “easy” measure, introduced in more than 60 countries worldwide doesn’t yet garner support from the Chinese authorities. In 2008, in a meeting in South Africa discussing the enforcement details of the WHO Framework Convention on Tobacco Control, the Chinese delegation claimed that the beautiful scenery printed on Chinese cigarette packs embodies China’s historical and cultural heritage and that using a photo of a rotten lung “would insult and show disrespect to the public.”

So what is the real problem holding China back from fighting the harm that tobacco inflicts? In anti-tobacco activists’ eyes, the fact that the State Tobacco Monopoly Administration governs both the selling and the control of tobacco is the root cause of the problem. In other words, this bureau is both player and referee. “It’s the same set of people working for the China National Tobacco Corporation and the State Tobacco Monopoly Administration," As Li Enze, a Chinese lawyer, told Caixin. "Their director is one and the same person.”

Having a long smoke in Chengdu â€" Photo: inchengdu

The tobacco monopoly was started to ensure the country’s fiscal revenue. Because of its monopoly, the China National Tobacco Corp. (CNTC) makes enormous profits and hands over a huge amount of revenue to the state treasury each year: 41 billion RMB ($6.4 billion) of fiscal revenue, a quarter of its total annual profits. Even the China National Petroleum Corporation, the fourth largest company in the world in terms of revenue, and China Mobile Communications Corporation, the world's largest mobile phone operator by subscribers â€" both state-owned enterprises â€" come in behind the state-run tobacco business in filling the public coffers.

As a result the tobacco industry presents the biggest opposition force to a smoking ban. The CNTC has 33 provincial affiliates, and each affiliate owns its own county-level sub-affiliates. The county-level tobacco manufacturers are the ones responsible for cigarette sales, and their profits heavily underwrite the local authorities’ treasury. In a big tobacco plantation province, such as Yunnan, add in the power of a huge number of tobacco farmers.

Of course, there are ways to make adjustments for both agricultural output and fiscal sources, but Wu Yiqun says the real problem elsewhere: No country should ever rely on tax revenues that have a negative effect on the lives of its own people.

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Society

Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum

-Analysis-

SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.


It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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