Tobacco Industry Development In China

Production of tobacco leaf is widely distributed in more than 500 city and counties in around 22 provinces in China . There are over three millions of rural households , about 15 millions of farmers engaged in planting tobacco leaf , and about 500 thousands of staff and workers who are employed in cigarette companies. There are 4.9millions of cigarette retailers in China, most of whom are private . Sales of cigarette has became the major employment channel for the 10millions of population . China is a big power in tobacco industry, but there is lack of well-known brands , and the industrial concentration is in the low level because of the numerous tobacco processing companies . This study regarded the tobacco leaf planting and processing as a whole , analyzed main parts and marketing bodies of Chinese tobacco industry one-by-one from the point of industrial value chain , found out the reasons which caused the movement of planting areas from north to south and big fluctuations of tobacco outputs , measured the concentration ratio , performance and tobacco value appreciation of Chinese tobacco industry in every parts from planting to circulation , and put forward some proposals to develop the entire Chinese tobacco industry.First, this research described systematically the development of the world tobacco industry, found out the position which china takes. Second, this research analyzed Chinese tobacco leaf and cigarette production, consumption and international trade, and focused to analyze the cost and revenue of tobacco leaf production, concentration ratio of cigarette market, marketing structure, marketing performance, accretion process in every value chain link ,and the profits allocation of each market body. Finally , this research proposed the development strategies as whole for the tobacco industry.Chinese tobacco leaf planting layout moved from north to south , output of the traditional planting areas , such as Henan , Shandong , Anhui, decreased day by day . Yet, Yunnan and Guizhou have became the major tobacco leaf planting areas . From the study results of and revenue since 1982 , it can be concluded that it was the continuous upsurge of material and labor costs , especially labor cost, which raised the production costs , and labor cost occupied half of total costs . Not only that, it was the violent fluctuation of production profit during years which caused the unstable tobacco leaf production. It needed to input twice as much material cost and four times as much labor cost to produce tobacco leaf contrast to produce grain. We can see that which caused the changes of the tobacco leaf planting areas from north to south was not the internal demand (quality of tobacco leaf ) to plant but the choices of the farmers to earn more.This Dissertation reviewed tobacco leaf planting history and the reforming process of tobacco industry in China , analyzed the results of the tobacco industry reformation . With empirical studies for tobacco industry concentration ratio , the author found that the Chinese cigarette market was scattered highly before 2002 . It has been changed to some extent since the reforming of the tobacco industry . In 2005 , the index of marketing concentration was raised about double than the average index of from 1984 to 2002 . Chinese cigarette market now , however , is still in the state of scattered competition , with various companies and low industry concentration ratio . This Dissertation analyzed respectively the structure of tobacco processing industry , marketing power , and the factors influencing marketing performances , in order to confirm the marketing structure and performance by using econometric model , such as NEIO , AEL and PCM model . The conclusion is as follows : the marketing structure of Chinese tobacco industry was belonged to monopolistic competition ; there were strong marketing power which were enlarging constantly ; some strong marketing power caused high losses of social welfare ; marketing concentration had positive effect on the profit; increasing capital input favored the profitability of tobacco industry ; it was no use to increase the labor input to improve the tobacco industry performance ; and increase of middle input could decrease the profitability .This Dissertation analyzed the value chain of tobacco industry , and concluded : the value of planting was low , but processing appreciation was biggest , and there was rich profit in the chain of sale cigarette. It was tobacco processing companies who made huge amount of net profits , yet the profits belong to farmers and retailers were very poor , it was the government who got the biggest revenue , and it was farmers who got least revenue of all.This Dissertation suggested to concentrate the tobacco leaf planting to the superior areas , organize farmers better , and the government should provide farm subsidies to improve the current situation . Not only that, Dissertation suggested to encourage the tobacco companies to manage in groups, increase market share at home and abroad, and strengthen their international competitiveness . This Dissertation also suggested that the government should adjust tax policy of tobacco industry to improve the development of the tobacco industry.