Tobacco Asia

34 tobaccoasia Issue 6, 2026 November / December By Timothy Donahue China's tobacco market has always been massive. Now the world's largest tobacco industry is preparing for something new. For decades, China National Tobacco Corporation's (CNTC) domestic business has been overwhelmingly built around combus- tible cigarettes, supported by a vast tobacco-growing system and a state monopoly that regulates the market and operates its dominant tobacco company. That business remains enormous. China produces nearly 2.47 trillion cigarettes annually, according to data presented by 2Firsts, a Chinese research and consulting firm, at the InterTabac-InterSupply trade fair in Dortmund, Germany. In 2024, tobacco was grown on slightly more than 1 million hectares, yielding about 2.26 million met- ric tons of leaf. But beneath that scale, something is shifting. China Tobacco is developing heated tobacco products, re- searching nicotine pouches and other modern oral formats, investing in premium handmade cigars, and expanding its international opera- tions. Meanwhile, the country's private-sector vapor industry remains one of the world's most important manufacturing and export hubs for e-cigarettes. Alan Zhao, co-founder and c.e.o. of 2Firsts, said China Tobac- co's thinking about next-generation products has shifted markedly. "The China tobacco market [is] facing a transition from tradi- tional to next generation," Zhao said, adding that only a few years ago many within China's system did not believe new tobacco products would become a significant part of its future. China's Tobacco Market Begins Its Next Transition China's tobacco industry is evolving, with China Tobacco exploring new product categories and expanding overseas, while the private-sector vapor industry remains a global manufacturing and export powerhouse. Now, he said, "They begin to recognize it. They begin to rethink it." The State Tobacco Monopoly Administra- tion (STMA) performs regulatory and monopoly- administration functions. CNTC operates the commercial side of essentially the same system, encompassing manufacturing, wholesale distribu- tion, tobacco leaf, and international business. That relationship gives the government enormous in- fluence over the market's direction. "Data is the outcome," Zhao said. "Policy is the logic." Cigarettes still pay the bills Any discussion of the world's largest cigarette mar- ket starts with combustible cigarettes because ciga- rettes remain by far the most important category. China Tobacco manufactures and sells near- ly 50 million cases of cigarettes annually, according to Zhao's data. The domestic market also spans a wide price range, from relatively inexpensive ciga- rettes to premium products. For roughly two decades, one of China To- bacco's strategies for maintaining revenue growth as cigarette consumption came under pressure was to shift consumers toward higher-priced products. "They have continued to do it for the past 20 years," Zhao said. "That is to upgrade the con- sumer from a lower price to a higher price." The logic was straightforward.

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