Print

Mail

wiki links

BAT signs accord in China

British American Tobacco Plc signed an accord with China's Sichuan province to build its first factory in a nation that smokes a third of the world's tobacco, posing a challenge to a ban on such investment.

Martin Broughton, chairman of the world's second biggest cigarette maker, said in an e-mail to Bloomberg News that the provincial government agreed it could build the facility on a 96 hectare in the city of Mianyang. A Chinese regulator said the plan needs a change in legislation to proceed.

The world's largest cigarette makers want to set up factories closer to China's 350 million smokers as sales in Europe and the US decline. The central government, which secures 7.7 percent of its tax revenues from the cigarette trade, has been reluctant to give up monopoly control of the industry.

Broughton didn't comment on the ban in his e-mail and British American Tobacco's communications officer Ann Tradigo declined to comment in London.

BAT didn't say how much money it plans to spend on the plant.

London's Business newspaper reported on July 28 that BAT may spend ?250 million (US$390 million) on its first China factory.

"What BAT signed with the Sichuan government is a letter of intent," said Xu Dan, a spokesman at Beijing-based China National Tobacco, a government agency that regulates China's 146 cigarette-makers. "It doesn't mean it will come through. All these ventures need to be approved by National Tobacco. As far as we are aware, there's no change to the present ban on foreign investments."

Some BAT brands, which include Lucky Strike, Kent, Dunhill and Pall Mall in China, are sold in China under tariffs that price them out of the reach of most smokers, leading to a thriving black market. A factory would give the company a low-cost toehold in a country that makes 1.6 trillion cigarettes a year.
This story has been viewed 1511 times.