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Tag: China

  • China Tobacco Manager Pleads Guilty to Corruption

    China Tobacco Manager Pleads Guilty to Corruption

    Image: waldemarus

    A former deputy manager of China Tobacco Yunnan Industrial Co. pleaded guilty on Jan. 25 to taking more than CNY354 million ($50 million) in bribes, reports China Daily.

    Prosecutors accused Gu Bo of taking advantage of his positions from 1999 to 2018 to assist others in their business activities in return for illegal payments.

    Gu was placed under disciplinary review and supervisory investigation in January 2023. He is the fourth China Tobacco Yunnan Industrial official to be investigated for corruption since last year.

    In 2023, authorities probed the activities of Zhang Shuichang, Zhu Shaoming and Wu Yi.

  • Hong Kong Seizures Hit $288 Million in 2023

    Hong Kong Seizures Hit $288 Million in 2023

    Credit: Alven 0920

    Customs officers in Hong Kong reported that the agency had impounded more than 650 million black market cigarettes worth HK$2.25 billion ($287.8 million) last year, the largest annual cash value in more than two decades, according to media reports.

    The seized cigarettes would have generated about HK$1.54 billion in tax revenue, also a record, over the same period, according to an undisclosed source.

    Last week, authorities in Hong Kong said they were considering a further increase in tobacco duty.

    Last year’s total number of cigarettes seized was lower than the 732 million impounded in 2022, although the value was higher. Last year’s record seizure coincided with a 31 percent tobacco tax increase in February, which raised the average cost of a pack of 20 cigarettes by HK$12 to more than HK$70.

    A pack on the black market costs HK$18 to HK$38.

    The source said the confiscated tobacco products were stored in government warehouses currently, pending court proceedings or further investigations before being destroyed and buried at landfill sites.

    He added customs officials would boost efforts to combat crime syndicates that tried to take advantage of busy logistics services in the run-up to the Lunar New Year to smuggle cigarettes into the city.

  • Vapes Evading U.S. Import Duties

    Vapes Evading U.S. Import Duties

    Image: Gudellaphoto

    E-cigarette companies have imported hundreds of millions of dollars of disposable products from China into the United States without paying taxes and import duties, according to an AP report.

    Last week, U.S. authorities confiscated 1.4 million units of unauthorized single-use e-cigarette products at Los Angeles international airport, with an estimated retail value of more than $18 million. The products were mislabeled as toys, shoes and other items.

    Records show that the makers of disposable vapes routinely mislabel their shipments as battery chargers, flashlights and other items. Critics blame ineffective regulation. “The steps toward regulating disposables have been very weak, and that has enabled this problem to get bigger and bigger,” said Eric Lindblom, a former Food and Drug Administration official.

    Heaven’s Gifts, the parent company of Shenzhen iMiracle, which manufactures the popular Elf Bar and EB brands, previously described how it could help customers evade import fees and taxes, according to the AP report.

    The firm’s website reportedly advertised “discreet” shipping methods, such as mislabeling the content of e-cigarette shipments and declaring a low product value. 

    Another strategy appears to be shipping e-cigarettes by air rather than sea. Air carriers are not required to disclose the same level of detail about their cargo as ocean vessels.

    U.S. tobacco companies have complained that their vaping products cannot compete with such lower priced disposables. Altria Group and Reynolds recently filed cases in California and with the International Trade Commission, respectively, against importers of disposable vapes.

    Flavored disposables began pouring into the U.S. shortly before China banned vaping flavors last year. China’s vaping manufacturing sector, which produces the lion’s share of e-cigarettes worldwide, is worth an estimated $28 billion, and the U.S. accounts for nearly 60 percent of the country’s vape exports, according to the China Electronics Chamber of Commerce.

    Authorities have encouraged those exports while at the same time curtailing the country’s domestic vaping business.

  • RLX Technology Reports Challenging Quarter

    RLX Technology Reports Challenging Quarter

    Photo: RLX Technology

    RLX Technology reported net revenues of RMB428.1 million ($58.7 million) in the third quarter of 2023, compared with RMB1.04 billion in the same period of 2022. Gross margin was 24.7 percent in the third quarter of 2023, compared with 50 percent in the comparable 2022 quarter. GAAP net income was RMB172.7 million, down from RMB505.2 million in the prior-year period.

    “The end of the third quarter of 2023 marked one year since the new regulatory framework for the e-vapor industry came into effect,” said Ying (Kate) Wang, co-founder, chairperson and CEO of RLX Technology, in a statement.

    “As a legitimate industry participant, we have remained dedicated to developing our product portfolio to provide adult smokers with compliant, superior-quality products. While we have made some progress with our recovery, we are still facing external challenges, especially the impact of illegal products. We recognize that many users are still unaware of these new regulations, such as flavor restrictions, which has slowed their adoption of the new national standard products.

    “To address these near-term obstacles, we will forge ahead with our core strategy: providing a wide variety of quality, compliant products across an extensive range of price points to meet users’ various needs. Meanwhile, we are making efforts to enhance users’ understanding of the new regulations and collaborating with regulators to combat illegal products and create a healthy and orderly market. As a trusted e-vapor brand for adult smokers, we believe that more users will gradually switch to our products as increased awareness of the new regulations and the dangers of substandard, illegal products rises.”

    “In the third quarter of 2023, we continued to face significant headwinds due to competition from illegal products,” added RLX Technology Chief Financial Officer Chao Lu. “Against this challenging backdrop, we resolutely executed our strategy and focused on improving profitability, which continues to be our top priority.

    “Our strategic cost optimization initiatives have begun to demonstrate positive outcomes, including a consistent reduction in our non-GAAP operating loss and signs of recovery in our non-GAAP net profit margin. Notably, we achieved a second consecutive quarter of positive operating cash flow this quarter, underscoring our business’ resilience in the post-regulatory era. Looking forward, we will remain committed to enhancing our financial performance and delivering sustainable value to our shareholders.”

     

  • Former STMA Deputy Prosecuted for Bribery

    Former STMA Deputy Prosecuted for Bribery

    Image: Kampan

    Former Deputy Chief of China’s State Tobacco Monopoly Administration (STMA) He Zehua has been prosecuted for accepting bribes, according to China Daily.

    Zehua was accused of taking advantage of his former positions to seek profits for others, accepting a large amount of money and valuables in return, according to a statement by the Supreme People’s Procuratorate.

    Zehua was arrested in July.

  • Former STMA Head Under Investigation

    Former STMA Head Under Investigation

    Photo: promesaartstudio

    Former head of China’s State Tobacco Monopoly Administration (STMA) Ling Chengxing is under disciplinary review and supervisory investigation, reports China Daily.

    Ling is being investigated on suspicion of violating Communist Party disciplines and China’s laws, according to the Communist Party of China Central Commission for Discipline Inspection and the National Supervisory Commission.

    Ling was head of the STMA from May 2013 to July 2018.

    The STMA is on the list for the 20th CPC Central Committee’s second round of inspection, which began Oct. 10, and the eighth inspection team of this round recently began its work at the administration.

  • Smoking Persists Despite FCTC

    Smoking Persists Despite FCTC

    Photo: Tobacco Reporter archive

    China continues to grapple with significant tobacco consumption, despite adopting the World Health Organization’s Framework Convention on Tobacco Control (FCTC) two decades ago, reports The Straits Times.

    In November 2014, the State Council released a draft on national tobacco control guidelines to meet its obligations under the FCTC. However, the draft never progressed beyond the public consultation phase, which was supposed to be completed by the end of that year, according to the Singpore-based newspaper.

    As the world’s largest tobacco producer and consumer, China still boasts an estimated 300 million smokers, constituting nearly a third of global smokers. According to The Straits Times, this phenomenon persists due to various factors including social norms, affordability of cigarettes and limited public education.

    Despite efforts such as anti-smoking campaigns and banning smoking in government buildings, many individuals continue to smoke, encouraged by the ubiquity of tobacco shops, low-cost cigarettes and deeply rooted cultural practices.

    The State Tobacco Monopoly Administration (STMA), which controls the tobacco industry, also acts as a significant employer, providing jobs to over half a million people across the nation.

    In much of China, the tobacco industry is considered a prestigious employer, with its stable income, generous salaries and employee benefits. In surveys of fresh graduates, China’s big tobacco firms—largely state-owned enterprises—are consistently rated some of the best companies to work for, with degree holders happy to take on blue-collar jobs on the factory lines.

    Manufacturing some 2.4 trillion cigarettes a year, China’s tobacco industry posted a profit of RMB132 billion ($18.3 billion) in profits in 2022, up nearly 12 percent from the year before.

    STMA’s operational arm, the China National Tobacco Corp., does not report sales figures but posted a record taxable income of RMB1.44 trillion in 2022. By comparison, the second-highest taxpayer, the Industrial and Commercial Bank of China, reported taxable income of RMB109 billion.

    While the anti-smoking lobby has been urging the government to sever the ties between the industry and its regulator, few expect that to happen, citing a lack of political will.

  • Chinese Helping Boost Russia’s Vape Market

    Chinese Helping Boost Russia’s Vape Market

    The withdrawal of European and American tobacco manufacturers and the gradual reduction of foreign e-cigarette brands doing business in Russia due to its war with Ukraine has allowed for the growth of Chinese e-cigarettes in Russia.

    As Russia’s tobacco industry relies heavily on the support and investment of foreign brands, the withdrawal of international tobacco companies will cause a large shortage in the Russian tobacco market, which will lead to a sharp increase in the price of tobacco products sold in Russia, according to iGeekPhone.

    By the end of 2021, there were more than 5,000 stores selling e-cigarettes in Russia, including more than 1,100 in the Moscow region.

    According to real estate platform DNA REALTY, the number of tobacco shops in Russia grew by at least 20 percent in 2022, with the bulk of their profits coming from e-cigarette sales.

    BAT announced it will withdraw from the Russian and Belarusian tobacco markets in 2023. Philip Morris International (PMI) and its subsidiary Fimo International, are also considering retaining their business in Russia because Russia is the seventh-largest tobacco market for PMI.

    Japan Tobacco suspended investments in Russia and Imperial Brands transferred its Russian operations to a successor in Russia.

    “E-cigarettes have great potential as alternatives to the tobacco market in Russia, where e-cigarette consumers account for 6.8 percent of the total number of smokers,” the article states. “After the United States and Europe, Russia is the world’s third-largest importer of electronic nicotine delivery systems (ENDS).

    “China accounts for 90 percent of the global market. In 2021, China’s exports to Russia reached 82.5 billion rubles. This year it could increase by 35 percent to 111 billion rubles.”

  • China’s Vaping Rules Force Retailer to Close

    China’s Vaping Rules Force Retailer to Close

    Image: Argus

    Chinese online retailer FastTech is closing in the wake of strict new vaping regulations, reports Vaping360.

    In a Dec. 5 post on its customer forum, the discounter blames restrictions introduced after the State Tobacco Monopoly Administration took control of China’s vaping business. The new measures have increased uncertainty, preventing the company from remaining competitive, according to the firm.

    China outlawed domestic online vape sales in 2019. The measure was followed by licensing and sales regulations along with the new tax scheme. Hong Kong’s ban on importing Chinese vape products for air shipping to export destinations—which is currently being reconsidered—may also have affected FastTech, which shipped many of its products through the city.

    FastTech sold Chinese-made vape products, including many semi-legal clones and copies of well-known products, to overseas customers at sometimes near-wholesale prices and shipped them inexpensively.

    According to Vaping360, there remain a number of FastTech competitors in China operating on a similar business model.

  • China to Restrict E-Cigarette Shipments

    China to Restrict E-Cigarette Shipments

    Photo: ikurdyumov

    China’s State Tobacco Monopoly Administration (STMA) plans to limit the number of vapor products a person can carry on them, reports The Global Times.

    According to a notice published Nov. 23, a person can possess a maximum of six “smoking devices,” 90 e-cigarette cartridges and 180 mL of e-liquid.

    On the same day, the STMA and the State Post Bureau jointly announced restrictions on the delivery of vapor products. Each shipment may contain a maximum of two “sets,” six cartridges and 12 mL of e-liquid.

    Each recipient is allowed to accept delivery of no more than one shipment of vapor products per day.

    In April, China’s tobacco regulator approved mandatory national standards for e-cigarettes that came into effect in October.