Tobacco Asia

Tobacco Asia 35 "China Tobacco wants to maintain enough supply and increase government rev- enue, but the consumer quantity cannot increase continually," Zhao said. "Because more and more people are quitting smoking, the only thing they can do is to raise consumer prices." He said the strategy worked for years, but moving smokers to more expensive cigarettes has limits, especially when consumers are under economic pressure. "For now, the strategy cannot work because the price cannot keep going higher," Zhao said. "Consumers don't have that much money, and they don't want to spend that much money on tobacco." He said some consumers who previously bought higher-priced cigarettes are moving down the price ladder. This is putting pressure on the conventional cigarette business at the same time that China Tobacco is seeking additional sources of value. China's leaf system has been changing as well. Between 2005 and 2024, tobacco- growing acreage declined by roughly one-fifth, while production declined less and has remained relatively stable in recent years. Rather than continuing acreage-driven expan- sion, the system has increasingly emphasized controlled supply, efficiency and quality. "Tobacco leaf does not operate like a typical open agricultural commodity," Zhao said. "Production is shaped by planning." Growers produce under planned purchase contracts, with tobacco companies or authorized units purchasing the crop. As a result, acreage is influenced not only by commodity prices but also by policy, industrial demand, and supply management. Yunnan remains China's largest tobacco-growing province, while Guizhou, Hu- nan, Sichuan, Chongqing, Henan, Hubei, and Fujian are also significant tobacco-pro- STMA and CNTC jointly shape China's tobacco industry, combining government oversight with commercial control of production, distribution, and international trade. Credit: N509FZ, CC4.0. ducing regions. Technology is changing the farms themselves. "Tobacco remains labor-intensive, but growing regions are expanding the use of mechanization, digi- tal monitoring, drones, and modern cur- ing systems," Zhao said. He added that the objective "is not simply more output. It is greater efficien- cy and more consistent quality." China also remains a substantial buyer of foreign tobacco. Leaf and related-material im- ports rose from US$1.71 billion in 2023 to US$2.02 billion in 2025, while exports increased from about US$470 million to US$578 million. In 2025, China import- ed 185.2 million kilograms and exported 188.3 million kilograms. Yet the nearly identical physical volumes masked a sig- nificant difference in value. "Equal ton- nage does not mean equal products, equal value, or a balanced position in natural tobacco leaf," Zhao said. Flue-cured tobacco accounted for much of that difference. In 2025, China imported 177.3 million kilograms of flue- cured tobacco, compared with 89.9 mil- lion kilograms in exports. Imported leaf averaged US$10.74 per kilogram, com- pared with US$5.50 for exports. During the first seven months of 2026, however, China's tobacco-leaf im- port value fell 19.1% year over year, while volume fell 10.9%. "This is a clear seven- month import contraction," Zhao said. "Still, the data does not yet show whether it marks a structural turning point or a shorter adjustment." Vapor plays by different rules E-cigarettes occupy a unique position in China's tobacco structure. "For e-cig- arettes, this is the only tobacco product that can be operated by a private com- pany in China," Zhao said.

• Cover