China tobacco sales fall for the first time in two decades

The amount of tobacco sold in China fell last year for the first time in more than 20 years, as a government health drive and rise in excise taxes began to take effect.

China has long bucked the trend of falling tobacco volumes: in the past ten years, while worldwide sales have dropped 2 per cent, the amount of tobacco sold in China has increased 21 per cent to 2.5tn cigarettes a year.

But after rising 2.4 per cent in 2014, Chinese tobacco consumption dropped 2.4 per cent last year, the first fall since 1995, according to data from Euromonitor. This is equivalent to a drop of about 60bn cigarettes.

Despite the fall, China still accounts for 45 per cent of all cigarettes smoked worldwide. More than half of all adult men smoke, according to the World Health Organisation, and 1m a year die from tobacco-related illness.

“Given the size of the Chinese market, this decline exerted a huge impact on total volumes with the world picture worsening by more than 2 per cent to reach around 5.5tn sticks, a significant deterioration set against a virtually flat performance in 2014,” said Shane MacGuill, head of tobacco research at Euromonitor.

The fall follows a huge state-sponsored health drive designed to curb smoking rates. The Chinese government last year introduced a ban on smoking in all indoor and some outdoor public places.

Under the rules, anyone who violates the ban must pay a fine of Rmb50 (about $8), rising to Rmb200 if they do not immediately stub out their cigarette. Smokers who break the law three times can also be named and shamed on a government website. Businesses can be fined up to Rmb10,000 for failing to enforce the law on their premises.

Not long ago in China, restaurants and offices were wreathed in cigarette smoke and hotel curtains reeked. Today, as in the US and Europe, smokers are now found outdoors.

Pre-school children are also taught to approach smoking adults on the street and say “no smoking!” while restaurants, hotels and other public places have much stronger enforcement of no-smoking rules.

China had launched a number of antismoking campaigns in the past but this latest drive is far stricter. The rollout of rudimentary national health insurance made smoking a burden on the state, and the government has been forced to act.

But Beijing is also wary of hurting a precious revenue source — tobacco revenues continue to contribute healthy sums to state coffers, adding about $150bn last year, equivalent to 6.5 per cent of the annual budget income.

The China National Tobacco Corporation, a state monopoly, sells 98 per cent of all cigarettes in China. British American Tobacco has less than 1 per cent of the market.

The fall in smoking also comes on the back of an increase in excise taxes on cigarettes, which rose from 5 per cent to 11 per cent last year. In addition, the Chinese government unveiled restrictions on tobacco advertising, including a ban on adverts that target minors and on tobacco adverts in public places.

While volumes fell in China, they grew in western Europe for the first time in several years. “Economics there recovered, and switching to illicit and vapour products lessened,” said Mr MacGuill. “But recent legislation, such as the Tobacco Products Directive in Europe, is becoming increasingly common and may ensure that even modest expansion of the kind witnessed there in 2015 is a firmly historical phenomenon.”

Source: http://www.ft.com/cms/s/0/5d77816e-36fe-11e6-a780-b48ed7b6126f.html#axzz4CHNykA2R