How Big Tobacco Sold Out To China

By Nick Pope via Daily Caller News Foundation | October 24, 2024

Major Western tobacco companies have helped China expand its power for years while seeking access to the lucrative Chinese tobacco market, a Daily Caller News Foundation review found.

Companies including Philip Morris International, British American Tobacco and Imperial Brands struck lucrative business deals with the China National Tobacco Company (CNTC), the Chinese state-owned tobacco monopoly, or its subsidiaries over the past 25 years. Along the way, the Western tobacco brands variously facilitated China’s accession to the World Trade Organization (WTO) and helped advance the Chinese Communist Party’s “Belt and Road Initiative” (BRI), a global infrastructure and commercial investment strategy that some say undermines the U.S.-led international order.

The Chinese tobacco market, 96% of which CNTC controlled as of 2022, is enormous: 2.4 trillion cigarettes are sold annually in the country, a figure that amounts to about 46% of annual global sales, according to the Pulitzer Center. CNTC’s profits and taxes made approximately $213 billion for the Chinese state in 2022, falling just shy of China’s $214 billion defense budget that year and leaving little question as to why major Western tobacco companies want access to the Chinese market. (RELATED: US-Funded Research Helped Strengthen China’s Military, Congressional Report Says)

British American Tobacco, which operated in China prior to the communist takeover of the country, is one such company that has cashed in on access to the modern Chinese tobacco market.

Starting in the late 1990s, British American made efforts to help China join the WTO, which would have helped enrich and empower the country by facilitating global trade. In exchange for pushing for China to join the WTO, British American Tobacco hoped that it would be rewarded with “preferential treatment” from the Chinese government on the back end when the company sought to establish business operations in the massive Chinese market.

“[I]f we are perceived as facilitators for China’s accession, we may expect a ‘Preferential treatment’; hence easier access compared to our competitors with all commercial benefits attached to it,” a British American Tobacco employee wrote in a 1997 email to co-workers. A 2007 research paper published in a journal called Tobacco Control described British American as “engaged in the most active lobbying during China’s accession to the WTO.”

The same email said that Philip Morris was also being “extremely aggressive” in its push to access the Chinese market at the time.

China eventually joined the WTO in 2001. In the nearly 25 years since, China repeatedly broke or ignored WTO rules to its own benefit, according to a 2023 report submitted to congress by the U.S. Trade Representative.

Moreover, British American entered into a joint venture with CNTC subsidiaries in 2013, a move that helped the company tap into the Chinese tobacco market. As part of the deal, the new joint venture entity took ownership of the State Express 555 brand of cigarettes, which are highly popular in China in part because Chairman Mao Zedong liked to smoke them, as well as the popular Shuang Xi brand, according to British American’s 2013 annual report.

These developments proved to be quite lucrative for British American, which listed both State Express 555 and Shuang Xi as two of its “key strategic brands” in its 2016 annual report. (RELATED: Chinese Military Company Backing Campaign To Tank Major National Security Bill Before Senate Vote)

In 2017, four years after British American Tobacco established the joint venture with CNTC, the Chinese tobacco industry officially became involved with the BRI, according to Jennifer Fang, a research fellow at the Global Tobacco Control Research Program and a member of the health sciences faculty at Canada’s Simon Fraser University. CNTC is a significant contributor to the Chinese government’s “Big Fund,” an initiative for developing microchips, and one of its subsidiaries partnered in 2017 with a separate state-owned firm to buy a major bank in Kazakhstan in aid of the BRI, according to a major 2023 investigative report published by The Examination.

“The CNTC has looked to operate at an international level as a way to maintain revenue,” according to a 2023 article from the University of Bath’s Tobacco Tactics project. “As a state-owned enterprise, a more aggressive overseas profile also supports the Chinese government’s global Belt and Road Initiative.”

An industry’s involvement in BRI suggests that it is a key industry for the Chinese state to leverage to pursue its goal of becoming the dominant global economic leader at the expense of the U.S. and its Western allies, according to a July 2022 article in the Journal of Indo-Pacific Affairs, the Air Force’s professional journal.

Like British American, Philip Morris also made efforts to further insert itself into the Chinese tobacco market following China’s WTO accession.

In 2005, Philip Morris reached a deal of its own with CNTC to establish a joint venture and to ramp up production of Philip Morris’ Marlboro cigarettes. The joint venture also pushed Chinese cigarette brands like Red Golden Dragon in foreign markets, according to a 2010 report by an organization called the Campaign for Tobacco-Free Kids.

Philip Morris produced about 700 million Marlboro cigarettes in China starting between August 2008 and the end of the year while helping CNTC sell its own brands in places like Poland and the Czech Republic, according to the Campaign for Tobacco-Free Kids report. Red Golden Dragon cigarettes ended up comprising about 2% of the Czech cigarette market by the end of 2008. (RELATED: ‘Major Conflict’: Chinese Military-Linked Pharma Corps Make Flurry Of Payments To Taxpayer-Funded Scientists)

Like British American Tobacco and Philip Morris, the U.K.-based tobacco giant Imperial Brands also made plays to capitalize on the Chinese market following the country’s accession to the WTO.

Imperial Brands created a joint venture with Yunnan Tobacco — a subsidiary of CNTC — in 2003.

The 2003 deal also preceded a 2004 agreement between Imperial Brands and a subsidiary of Yunnan Tobacco, in which the subsidiary would make and sell approximately 10 million cigarettes under the Imperial West brand and with the help of Imperial Brands’ marketing, according to a 2004 report by China Daily, a Chinese state media outlet.

In 2017, the same year the Chinese tobacco industry adopted the BRI, Imperial Brands built on its 2003 deal by creating a venture with CNTC called “Global Horizon Ventures Limited.” That particular entity enabled Imperial Brands to sell more of its Davidoff and West cigarettes in China in exchange for pushing Chinese brands like Jade in foreign markets.

Among other things, these deals effectively permitted Imperial Brands to sell its cigarettes in China in exchange for Imperial Brands enabling CNTC to expand to at least 16 other countries, according to a July 2022 report by STOP, a tobacco industry watchdog group.

Philip Morris, British American Tobacco and Imperial Brands did not respond to requests for comment.

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