China might be the original home of the electronic cigarette, but it appears that tobacco is still the major moneymaker for this country. According to a recent report from Industrial Bank Co Ltd., China National Tobacco Corporation could potentially earn a larger net profit this year than Wal-Mart and HSBC.
While China’s tobacco sales have been kept under wraps in the past, the new report showed 2010 net sales reaching $18.7 billion. In contrast, HSBC reported $16.8 billion profit last year and Wal-Mart followed at $15.7 billion. China’s total tobacco profits topped the world’s three largest tobacco companies: Philip Morris, Altria, and American Tobacco.
Smoking is a huge trend in China and it doesn’t show any signs of slowing. According to the World Health Organization, there were around 350 million reported smokers in China in 2010. The majority of these smokers are men and smoking is culturally perceived as a masculine activity.
In 2005, China implemented the WHO’s tobacco control policies. Then in 2011, China introduced a new mandatory ban on smoking in all indoor public places. Around the same time, the Ministry of Health and the Ministry of Education partnered to create new smoking bans in and around schools. To cap off the new anti-smoking initiatives, the State Administration of Radio, Film, and Television made a new policy to prohibit tobacco ads (both direct and indirect).
With all this emphasis on banning smoking, you would think that China’s tobacco sales would be decreasing. However that doesn’t seem to be the case. This article estimates that about one million people die from tobacco use in China each year.
Perhaps the bigger issue is how the government is benefitting from tobacco revenue. Just last year, China’s government received over $95 billion in tax revenue from tobacco sales. According to Bloomberg, cigarette sales were expected to rise by 14 percent every year in 2010, topping the charts at 1.8 trillion yuan in sales by 2015.
With so much money coming from tobacco sales, it is no wonder that China doesn’t seem to be cracking down on smokers or putting much emphasis on e-cigarettes as an alternative. While an estimated 3 out of 5 Chinese men smoke, e-cigarettes are not nearly as popular among the Chinese population as they are in Europe and North America.
Electronic cigarettes were first invented in China by a researcher named Hon Lik in 2003. Since then, there have been 413 e-cigarette factories established in China to create e-cigs for a variety of brands. Surprisingly, Chinese smokers are still not buying into the e-cig craze.
With Chinese tobacco profits continuing to grow, we just might see them surpass Wal-Mart and HSBC this year. But what price will China’s population pay for the growing tobacco use? While the United States is seeing positive health changes as a result of dwindling tobacco use, it stands to reason that China might have the opposite scenario as health problems related to tobacco worsen.
Do you think China’s tobacco industry will continue to grow as predicted?