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Thursday, April 12, 2007

Cigarettes in China

The New England Journal of Medicine has an article discussing cigarette smoking and third world countries. The article is a little long on the editorializing, but does have some interesting points:
When China joined the World Trade Organization in 2001, it obtained a special exemption to maintain its monopoly, China National Tobacco, which produces 1.8 trillion cigarettes annually.2 Although China agreed, in principle, to phase out quotas on imports, it also began a radical restructuring of its industry, centralizing manufacturing, limiting the number of brands in an effort to build brand loyalty, and quietly expanding its sales abroad.3 As international pressure to cut tobacco use mounts, the Chinese government struggles to balance advancing the country's economy with maintaining the health of its society and garnering global support.

In 2005, cigarette sales generated $32.5 billion in taxes and profits in China, approximately 7.6% of the government's total revenue. In contrast, the government spent $31,000 on tobacco control. Tobacco remains a pillar of the Chinese economy: consumers spend more on cigarettes than on alcohol or personal care products. Moreover, tobacco is seen as key to economic growth in the more remote, poorer sections of the country, such as Yunnan province, whose government depends on tobacco sales for more than 50% of its revenues.
1,800,000,000,000 (1.8 trillion) cigarettes a year? That's one heck of a monopoly - good luck to the anti-smoking advocates. It seems they have their work cut out.

As near as I can tell, that works out to about 70 packs of cigarettes per year for every person in China (population about 1.3 billion). In the US, with a 300 million population and consumption of 420 billion cigarettes per year (in 2002: http://www.infoplease.com/ipa/A0908700.html), US per capita concumption is about--gee, 70 packs per year.
Doc has a good point, in terms of per-capita consumption China is about the same as the United States. However, smoking seems to be a normal good for lower ranges of income. Therefore, the U.S. consumption of 70 packs per person is at a per-capita income of roughly $40,000 whereas the Chinese consumption of 70 packs per person is at a per-capita income of roughly $1,500.

If smoking is an inferior good for the U.S. population, at least at our level of income, but is a normal good for the Chinese population at their level of income, then I think the anti-smoking advocates have an up-hill battle in China.

Education about the harms of cigarette smoking can go a long way to dissuading consumption (at least it has in the U.S.) but such dissuasion seems to work best when the population considers smoking a normal good.
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