China's tobacco enterprises are making more efforts to speed up the industry's reshuffle, in a bid to foster the development of big cigarette brands and improve the sector's competitiveness.

Twenty-six of the country's major cigarette makers held a meeting late last month in Southwest China's Chongqing Municipality, discussing how to deepen strategic co-operations for mutual success.

The Chongqing Company of the China Tobacco Corporation, the initiator of the meeting, proposed five specific measures for brand building and market adjustments.

The proposal, drawn under the guideline of the State Tobacco Monopoly Administration (STMA), received echoes from other participants.

The STMA created a list of the country's top 100 cigarette brands in August, to guide the industry's restructure. The administration plans to establish 30 to 50 key enterprises through mergers and acquisitions in three years, and close small cigarette factories with an annual production capacity of less than 100,000 cartons by the end of this year.

Meanwhile, under the reshuffling move, the currently existing more than 300 brands are expected to integrate into about 100.

At the meeting, the 26 enterprises also agreed to eliminate trade limitations between provincial and regional markets, and finally build an open and unified domestic market.

The tobacco monopoly bureaux of the five provinces and Chongqing municipality in Southwest China agreed to unify the regional market beginning this month, selling products at the same price for same brand cigarettes.

"The purpose is to break market barriers and beat the illegal marketing channels caused by differentiated prices," said Sun Zezhi, vice-general-manager of the Sichuan Cigarette Selling Co.

According to him, the gross profit for cigarette selling in the province will increase by 2 per cent due to the deal.

Though no such agreement was signed between the 26 companies, they all showed intentions of deepening strategic co-operation.

"Many local markets are moving towards the establishment of an open market," said Hu Xinhua, deputy director of the STMA's general office.

"The purpose of the industry reshuffle is to help domestic tobacco companies deal with mounting competition from big foreign counterparts," he said.

After China entered the World Trade Organization (WTO), foreign tobacco giants are paying great attention to the huge Chinese market.

The country lowered its import tariff on leaf tobacco to 10 per cent at the beginning of this year from the original 40 per cent, and tariffs on cigarettes from 65 per cent to 25 per cent, according to its WTO commitment.

Source: China Daily