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Bad Habit, Good Money in China

Yunnan province shows how hard it may be for the government to wean itself from a huge source of revenue, even one that is a known killer.

October 12, 2003|Sam Howe Verhovek | Times Staff Writer

CHUXIONG, China — Yang Zhengyun is very proud of the crop he grows in the rich red soil here in south China's Yunnan province. "We raise the best in the whole country," said Yang, who had brought his harvest to a farmer's bazaar on his flatbed motorbike, joining hundreds of others clamoring to sell the product that is at the heart of the local economy: tobacco.

In a country where nearly two-thirds of all men smoke and offering a cigarette amounts to a common form of greeting, this hilly province provides a particularly vivid illustration of how dominant a role tobacco plays in China's financial system -- and how difficult it may be for the government to wean itself from a huge source of revenue, even one that is a known killer.

Taxes and profits from the official monopoly on tobacco provide about 10% of the central government's revenue in Beijing, and as much as 70% in some of the outlying towns and provinces where it is grown.

While the government has launched some programs in recent years to warn people about the dangers of smoking, there is little indication that these efforts have had much of an impact. With about a fifth of the world's population, China consumes nearly one-third of the world's cigarettes.

Here in rural Yunnan, some people dismiss the threats posed by cigarettes, instead defending them as a way to ward off stress, mosquitoes or the common cold -- or all three. Just as fundamentally, residents in the places where tobacco is grown defend it as their economic lifeblood.

"Let's face it, our farmers can do best with tobacco," Zhu Rui, the Communist Party leader of Luhe township here, said as he puffed on a local brand and oversaw the farmers' market, where men brought huge fronds of yellow-brown tobacco leaves for an intricate grading system that determined how much they would receive. "We know there will be pressure to grow other things, but I hope we don't have to switch."

The tobacco industry is centrally controlled, with production quotas and prices for the most part set by Beijing. Cigarettes in China cost as little as 12 cents for a package of 20, but more desirable brands can cost a dollar or more, ultimately providing a much greater margin for taxes and government revenue than food crops.

In the first six months of this year, the tobacco industry generated $10.5 billion in taxes and profits, according to the State Tobacco Monopoly Administration -- an increase of 13% from the same period in 2002.

For the Chinese government, though, running -- and relying on -- such a vast network of cigarette production poses an obvious dilemma, since the roughly 1.7 trillion cigarettes that the Chinese smoke annually impose a gargantuan health and productivity cost on the nation.

"The government is worried about the short-run impact" of any major drop in tobacco demand, said Teh-wei Hu, a professor of health economics at UC Berkeley, who has studied China's tobacco system extensively and met with officials here to urge higher taxes on tobacco as a way of discouraging smoking. "They certainly know tobacco is harmful, but they say, well, we have our immediate problem to take care of, and that's employment."

About 700,000 people in China die annually from tobacco-related illnesses, the World Health Organization estimates.

In one of the most comprehensive studies done, scientists at the University of Hong Kong and Oxford University concluded two years ago that unless major steps were taken to reduce smoking rates in China, tobacco-related diseases eventually would account for one in three of all premature deaths among Chinese men.

Richard Peto, an Oxford professor of medical statistics and epidemiology and an author of the study, said that one of the main problems in China is that substantial numbers of people do not fully believe health warnings about tobacco.

Smoking is ingrained in the culture. Chinese icons such as Mao Tse-tung and Deng Xiaoping were frequently seen with cigarettes in hand. Though today's leaders are generally not seen smoking in public, the influence of such earlier images seems to linger.

"Every man I know smokes -- it's just the custom," said Wang Kaibao, a 50-year-old itinerant worker in Anning, a steel town in Yunnan province. "It's not a matter of whether it's good or bad, it's just kind of a fact. It's a part of life here."

At the tobacco market, farmer Yang, 36, waved a lighted cigarette expressively as he spoke about his 15 years growing tobacco. He said he was convinced it was the most lucrative crop he could grow.

"I could plant two fields of rice," he said, "and I'd still make less than if I used half that much land for tobacco."

Needing to support his parents, his wife and two sons, Yang said he is leery of experimenting with other less lucrative crops. Like many other tobacco farmers here, he said he doubts that health warnings will cut into business much.

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