Monopolized Tobacco: Market Reform And Policy Readjustment In China

This paper studies on the issue of government control and the changes of the flue-cured tobacco monopoly system under the circumstances of general adoption of the market principle of agricultural produce. Due to the harmfulness of the product, tobacco industry has been one that is controlled by governments of various countries in the world. However, previous more studies carried out by researchers in China emphasized on natural monopoly industries such as telecommunications, aviation, railway, electric power, etc., and few studies have been made on tobacco trade and tobacco monopoly system. Since the establishment and implementation of tobacco monopoly system, great changes have taken place in economic system in China. China is changing from traditional planned economy to market-directed economy and a perfect socialist market economy system has been set up gradually. Under the circumstances of market economy, how the tobacco monopoly system to combine with market economy is a fundamental issue faced by tobacco industry, and how to resolve this issue will have a profound significance on the development of tobacco industry. The more important attention needs to be paid is that tobacco is an agricultural produce and a monopolized commodity as well and tobacco is faced with a tremendous challenge at the conditions when the market principle generally adopted for other agri-foods. In the macro-environment that the reform of the entire economic system is going on in-depth continuously and the market economy system is basically established, the pace of market-oriented reform of flue-cured tobacco monopoly system is obviously slower. Moreover, owing to characters of trade such as the planned allocation, vertical management, monopoly of sale, and administrative regulation and control, tobacco trade is called "planned island in market economy", "the last official crop" by people outside the tobacco trade. Today, as the market-oriented reform has become a common opinion, it is obviously that tobacco economy cannot be independent of agricultural economy and comprehensive economic structure reform and continuously operates according to traditional mode.Under this background and based on the practices of market economy in China, by using the theoretical framework and methodology of directed economy of industry and the methods of analysis, comparison, and case study, the paper analyzes China's tobacco monopoly system in depth and with the functional changes of government control and the reform and reorganization of tobacco monopoly system as the angle of view, it analyses the current situation and problems of China's tobacco monopoly system, approaches the development path of tobacco monopoly system under market environment, and through comparison of tobacco trade control systems of different countries in the world, the paper also tries to put forward comments on institutional reform from tobacco trade per se and external environment aspects.This study considers that the orientation and objectives of market-oriented reform of tobacco is introduction of competitive system, and the government's planned control and management should be implemented under the guidance of market and a market-planned internally flexible and externally rigorous type system that accords with the characters of tobacco trade and suits the requirements of market-oriented reform should be established. Generally speaking, this system should be favorable to the effective utilization and rational alocation of tobacco resource and gradually realizing the objectives of balance of total supply and demand and rational structure, and enhancing the general quality level and competitive power and promoting the sustainable development of tobacco production. Secondly, this system should favorable to the rational split and distribution of the benefits of tobacco trade and to the promotion of the establishment of stable and good relations among tobacco farmers, tobacco companies and tobacco factories, so as to promote the innovation of internal organization mode and operational mechanism and increase the overall benefits of tobacco trade. Thirdly, it should be favorable to the flexibility and adaptability of the economic system of tobacco industry, and the established system should guarantee the timely response to the changes of external economic environment and policy (especially the economic situation and policy of agriculture) the accomplishment of self-regulation.Generally speaking, the reform of this system contains four core components, namely monopoly system of sale, supply management of market allocation of planned resources, rational pricing and taxation, and scientific policy measures. This paper focuses on the innovative exploration of the following aspects:Firstly, this paper carries out studies and analysis on the monopolized tobacco product under the macro-market economy conditions. The paper considers that the "market" and "government" should not be conflicted in economic transforming countries, but a well balance between them should be kept. As for the special commodity of tobacco, it needs more government intervention and management control, but not proceed from the concepts or worship blindly market reform resulted from misdirection of the theory of new liberalism, thus providing theoretical basis for the existence of tobacco monopoly system in China. Naturally, the important thing is the introduction of competitive mechanism under tobacco monopoly system, strengthening internal management and innovation of mechanism, so as to improve the internal efficiency, decrease corruption and overexpansion of departmental benefits. Speaking concretely, the planned resource allocation mechanism with market demand as its core should be established under the prerequisite of persisting the control of planned total quantity of tobacco for the sake of meeting the demand of cigarette production. Therefore, the establishment of market-planned type management system is an important result of this study and the foundation of other contents of the paper.Secondly, this paper redesigns the market-operating framework and mechanism of tobacco under the control of government, especially emphasizes the seriousness of plan and the redesigns the main body of tobacco production and business. Based on the profit function, production function model and its theory of optimization, this paper has put forward a theoretical model for readjustment of tobacco purchasing price and it has become an important basis of price readjustment conducted by tobacco trade. The paper proves theoretically the elasticity of increase tobacco purchasing price, the rationality and necessity of increasing the level of procurement price (the average profit obtained by tobacco farmers should be higher than that by farmers are engaged in common agricultural production) and gradually relaxing allocation price, and thus providing theoretical basis for changes of tobacco price policy. In the meantime, the studies on the reform of taxation system will further give clear economic reasons of taxation of tobacco.Thirdly, the paper has made a systematic exposition of policy measures of development of tobacco production. It has designed a detailed policy framework for sustainable development of tobacco production in 10 aspects. The design not only has fully considered the characteristics of market economy, but also has considered the characteristics of tobacco as a monopolized commodity.The paper strives to construct the objectives, direction, and approaches of tobacco policy in China based on the adequate theoretical support so as to overcome the inadaptability of tobacco to market-directed environment.