The China National Tobacco Corporation: From domestic to global dragon?

Abstract

The China National Tobacco Corporation (CNTC), which produces one-third of the world’s cigarettes, is the largest tobacco company in the world. Over the past 60 years, the CNTC has been focused on supplying a huge domestic market. As the market has become increasingly saturated, and potential foreign competition looms, the company has turned to expansion abroad. This paper examines the ambitions and prospects of the CNTC to ‘go global’. Using Chinese and English language sources, this paper describes the globalisation ambitions of the CNTC, and its global business strategy focused on internal restructuring, brand development and expansion of overseas operations in selected markets. The paper concludes that the company has undergone substantial change over the past two decades and is consequently poised to become a new global player in the tobacco industry. This article is part of the special issue ‘The Emergence of Asian Tobacco Companies: Implications for Global Health Governance’.

History of the Emergence and Spatiotemporal Spread of Tobacco Mosaic Virus in China

“…Further inspection of outwardbound viral transmission movements from Yunnan indicates that there were far more introductions of virus into non-traditional and/or lowlevel tobacco production regions than there were movements of the virus into ready-established major tobacco production hubs such as Guizhou and Sichuan. The lower numbers of TMV movements reported here between Yunnan and other major production hubs may be the outcome of a strong protectionist policy that was exercised by premieres from the mid-1990's to the early 2000's to minimize the movement of and protect plants of economic importance from viral diseases [20,66]. Movements could also have been lower because the regions were more prepared to control the spread of the virus from the greenhouse to the field.…”

“…By 1934, an estimated 300 000 rural Chinese households were cultivating tobacco to sell to BAT [18]. While public records suggest that tobacco cultivation was firmly established by the mid-1800s in China [20], no exact information is given on where and/or when, the first tobacco crop was cultivated. It is widely known though that China's modern production of tobacco for cigarettes began in 1914 when BAT introduced tobacco seed to Yunnan province and planted in Yuxi County the following year [21].…”

“…Nevertheless, the majority of China's state administered tobacco industrial companies are distributed mostly within Yunnan, Hunan, Shanghai, Henan, Jiangsu, Zhejiang, Shandong and Guizhou provinces [29]. These tobacco companies have since been designated into three geographical groups; (i) the Shanghai group including Shanghai, Jiangsu, Zhejiang, Beijing, and Tianjin, (ii) the Yunnan group, including the northeastern and southwestern parts of China as well as Hainan and, (iii) the Hunan group, including Hunan, Hubei and central China [3,20].…”

“…To reassert tobacco control within her borders, China founded the China National Tobacco Corporation (CNTC) in 1981 [23], and shortly thereafter in 1983, it also established the State Tobacco Monopoly Administration (STMA) [24]. The CNTC is the umbrella company for approximately 31 smaller tobacco companies in China, and it is responsible for centralized management of staff, finance, properties, products, supply, distribution, and domestic and foreign trade of the country's tobacco industry [20,25]. The STMA in conjunction with CNTC, determines the overall government tobacco policy, including tobacco leaf quotas, pricing, cigarette production quotas, and it also controls tobacco production, marketing, imports, and exports [26,27].…”

“…During the Deng Xiaoping era (1978-1997), China's tobacco and cigarette production industry experienced rapid growth as manufacturers actively competed with one another for foreign currency to purchase cutting edge European equipment and newer varieties of tobacco seed stock [22]. Currently, all the four largest transnational tobacco companies; Philip Morris International (PMI), British American Tobacco (BAT), Japan Tobacco International (JTI) and Imperial Tobacco (IT), have direct partnerships with the CNTC [20,25,28].…”