RESEARCH PAPER

Breaking and re-entering: British American Tobacco in China 1979–2000

K Lee¹, A B Gilmore² and J Collin¹

¹ Centre on Global Change and Health, London School of Hygiene & Tropical Medicine, London, UK; kelley.lee{at}lshtm.ac.uk
² European Centre on Health of Societies in Transition, London School of Hygiene & Tropical Medicine

Correspondence to:
Correspondence to:
Dr Kelley Lee
Centre on Global Change and Health, London School of Hygiene & Tropical Medicine, Keppel Street, London UK WC1E 7HT; kelley.lee{at}lshtm.ac.uk

Objectives: To analyse the strategy used by British American Tobacco (BAT) to re-enter the Chinese market from 1979 to 2000 after historically dominating the market before the 1950s.

Design: Analysis of tobacco industry document files to date available only on-site at the Guildford Depository operated by BAT. An additional search of recent documents related to BAT, placed in the Minnesota Depository, was also carried out.

Results: BAT has been committed to regaining its historically dominant position in China since the country reopened to foreign companies in 1979. Initially, BAT remained cautious relative to competitors in seeking joint ventures, finding market access hindered by bureaucratic complexity, restrictions on foreign investment and imports quotas, and later an advertising ban. Instead, the documents suggest BAT strongly relied on illegal imports to expand market presence of State Express 555 and other key brands. It was only when risks to contraband sales increased that the company made greater efforts to establish a legal presence in the country. Attempts to stress the long history of BAT in China and a proclaimed commitment to corporate social responsibility have been used to facilitate later negotiations.

Conclusion: China has remained relatively closed to transnational tobacco companies (TTCs) during its transition to a market economy, maintaining a firm grip over foreign investment and imports. Nonetheless, BAT has circumvented such restrictions through illegal imports and exploitation of inconsistencies in the local enforcement of advertising bans. Governments need to understand and address the full range of market entry tactics by TTCs in order to ensure effective tobacco control.

Abbreviations: BAT, British American Tobacco; BATUKE, British American Tobacco United Kingdom Export; BCF, Beijing Cigarette Factory; BLI, Beijing Light Industry No. 1 Bureau; CORA, Consumer and Regulatory Affairs; CSR, corporate social responsibility; CITIC, China International Trust and Investment Service Corporation; MACHIMPEX, China National Machinery and Equipment Import and Export Corporation; CNNPC, China National Native Produce and Animal By-Products Import and Export Corporation; CNTC, China National Tobacco Corporation; CT, Chia Tai Investment Company; CTIEC, China Tobacco Import and Export Corporation; FCTC, Framework Convention on Tobacco Control; FSU, former Soviet Union; GATT, General Agreement on Trade and Tariffs; GT, general trade; JV, joint venture; NBD, New Business Development; PM, Philip Morris; PRC, People’s Republic of China; SEFK, State Express Filter King; SE555, State Express 555; SRBT, Sino-Russian Border Trade; STMA, State Tobacco Monopoly Administration; SUTL, Singapura United Trading Limited; TTC, transnational tobacco company; WTO, World Trade Organization

Keywords: China; market access; marketing strategy; policy influence; smuggling

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