[0:04]China, 1982. The economy is in shambles. After years of communist upheaval under Mao Zedong, most people live on less than a dollar a day. Now a new leader is trying to modernize one of the country's most important industries. His government founds a company that becomes known as CNTCSTMA. You've probably never heard of it. But their product kills up to 2.4 million people every year. A number that will likely soar in the next few decades unless something changes, which seems unlikely. There's far too much money at stake. Selling cigarettes. CNTCSTMA is likely one of the most profitable companies in the world. By far. But you won't find it on any Fortune 500 list. Why is that? Where is all this profit flowing? This is the story of a broken system. A look into a core part of Chinese state economics and at the devastating effects of a state sponsored public health crisis.
[1:29]This video was produced in collaboration with journalists from The Examination and is based on their phenomenal original reporting. You'll find links in the description.
[1:41]Durham, North Carolina, 1880. This is the American tobacco tycoon James B. Duke. He's just been informed that the automatic cigarette machine is finally ready. Cigarettes are pretty niche around this time. Tobacco is usually smoked with a pipe or just chewed. Companies still have workers roll cigarettes by hand. At a rate of about four cigarettes per minute. But this long awaited machine can roll 210 cigarettes per minute.
[2:13]It'll make James Duke cartoonishly rich. And it plays a big role in hooking millions on tobacco. When Duke hears the good news, the first thing he says is, bring me the atlas. Duke's never been to China, and he'll never visit either. All he cares about is that it has 430 million people. At the time, it's the most populated country on earth. That is where we're going to sell cigarettes, he says. He's told that Chinese people don't smoke cigarettes, but he isn't worried. They can learn. And he's right. His company, British American Tobacco, will become enormously successful in China. At the time, not many American businesses make money on Chinese soil. But British American cigarettes catch on like wildfire. Within a few short years, China is buying billions per year. Chinese tobacco companies can't keep up. British American Tobacco squeezes out more than 20 Chinese cigarette companies and goes on to dominate the market for 50 years. Then the communists take power in 1949. By then, China's love of tobacco runs deep. Smoking has become a big part of Chinese culture. Chairman Mao is a notorious chain smoker. He famously favors British American Tobacco's State Express 555's. He'll later switch to a domestic brand packaged in patriotic red, embossed with the Gate of the Heavenly Palace. Mao's doctor once advised him to quit, but he waved it off and said, smoking is also a form of deep breathing exercise. And during the Communist Revolution, Mao knows just how to rally his troops. He promises them food, shelter and cigarettes. A promise he'll fulfill.
[3:56]Tobacco first reached China in the 17th century. Qing Dynasty emperors tried to ban the drug. They threatened to behead anyone caught smoking. But people kept puffing away anyway. So instead, Qing rulers tried to get a monopoly on tobacco so that only they could use it for diplomatic purposes. Having failed at that, they eventually allowed the people to cultivate and smoke tobacco and just taxed it. That brought in tons of money for the Imperial court and created a livelihood for millions. In other words, China's been a nation of tobacco lovers for a long time. But smoking habits reach a whole new level after the Communist Revolution, when the new regime successfully nationalizes the tobacco industry. All foreign tobacco companies are banned. Mao places all the remaining private companies under government control. And his successor, Deng Xiaoping, also a chain smoker, consolidates those companies into one state controlled monopoly. By 1996, four decades after the revolution, China is smoking four times as many cigarettes. A number that's been growing almost continuously ever since. Speaking of growing numbers, more and more people choose Odu to grow their business. Over 15 million to be precise. But why? Traditionally, writing an invoice, managing your inventory, doing your accounting, selling on your website, that's four pieces of independent software, and none of it talks to each other. Hmm, but wouldn't it be nice if when you sold something on your site, it was all automated? I sold thing, so thing needs invoice, and inventory goes down and money made goes on the books. Kind of obvious, but it almost never works like that in real life. Well, unless the apps are all made by a single team and available on a single platform. Odu can save unbelievable amounts of time because so many aspects of business can be integrated this way. It's all in one management software that offers entrepreneurs over 45 intuitive applications. And this goes real, real deep into things like website building, project management, e-signatures, CRM, email marketing. But even if you're just starting out and you only need like five out of the 45 apps, it's just nice that the others are waiting there patiently. Ready to be plugged in once you scale up. Try Odu today. The first application is free for life with unlimited support and hosting included. And starting at just 19 and 90 cents a month, you gain access to everything else. Scan this QR code or visit the link in the description to get going.
[6:23]Today, every fifth person in China smokes. Over 300 million people. And tobacco is the country's most socially sanctioned addiction. Fancy cigarettes are a go-to gift for formal occasions. When you travel, people expect that you bring home cigarettes from your destination. And if someone offers you a cigarette, a lot of people would judge you if you turned it down. It's still common for doctors and high profile politicians to smoke. China has about 1/5 of the world's population, but buys nearly half of the world's cigarettes. About 2.4 trillion per year. Stacked on top of each other, this year's worth of Chinese cigarettes would reach from your house to the sun. With a few million kilometers to spare. And nearly all of the cigarettes they buy are produced and sold by one company. CNTCSTMA, also known as China Tobacco, is the world's largest cigarette manufacturer. Each year they make more than four times as many cigarettes as the next biggest tobacco company, which is Philip Morris, the people who make Marlboro. It's also 100% owned by the Chinese government, and it's part of this super ministry within the Chinese government called the Ministry of Industry and Information Technology. This is Jason McClure, a journalist who has investigated China Tobacco for years. China Tobacco is a legal monopoly in China, and it has 19 different cigarette making subsidiaries. It's authorized to control all aspects of production and distribution, from plantation to manufacture to import and export. Together they control more than 97% of China's cigarette market. This powerful monopoly funneled over 223 billion dollars in profits and taxes into the Chinese treasury in 2024. That's almost 100 billion more than Apple's total profit before taxes in that year. And all of this money flows directly to the government. The biggest tobacco company in the world is the Chinese government. One part of it at least, which means that the more the Chinese population smokes, the richer the state becomes. In fact, China receives more money from tobacco than Saudi Arabia does from oil. So in 2023, it was somewhere between six and 7% of the central government of China's revenue came from China Tobacco's profits or taxes paid by China Tobacco. Now to put that in context, that's about the equivalent of China's entire defense budget in 2023. In other words, China could finance their vast military with cigarettes. Inside the country, this isn't exactly a secret. Chinese smokers often joke about it. When they light up, they'll say they're helping the country build warships. Every puff is patriotic. But China Tobacco isn't just the producer of cigarettes. It's also the country's tobacco regulator. Officially, it's also supposed to get the country's smoking habit under control. The tobacco executives are literally inside the room where the decisions are being made about tobacco control and about public health policy.
[9:30]When it comes to the size and, you know, the, the display of cigarette warning labels, when it comes to whether or not cities should ban smoking in restaurants or public places. China Tobacco is able to be in the room where the decisions are made. And the money, the 200 billion dollars a year that the government receives in revenue from the company, explains their influence. Tobacco makes so much money, the government has fewer reasons to crack down on it the way it might other dangerous consumer products. All this presents a huge conflict of interest. Kind of like if your meth dealer were also your doctor. And a DEA agent.
[10:10]And here's where things get mind boggling. Not only is China Tobacco one of the biggest and most profitable companies in the world. There's also a good case it's the deadliest. The World Health Organization and other researchers try to measure how much sickness and death each year is caused by economic activity. Often by legal companies doing business in ways that happened to sicken or kill people over time. In many countries, there's a huge spike in deaths from diabetes and heart attacks linked to obesity. This is a direct result of people consuming more sugary drinks and eating more ultra processed food, often marketed and sold by large corporations. Drinking alcohol is linked to 2.6 million early deaths around the world each year from things like cancer, liver disease and traffic accidents. The WHO calls these the commercial determinants of health. Tobacco is one of the biggest of these, and it kills 7 million people every year. In most cases, trying to figure out how much responsibility an individual company bears for these early deaths is super complicated. If not impossible. Think of the pollution from burning coal. You can't just point your finger at one company. Some pollution in your hometown might come from a power plant down the road, but some might come from steel factories hundreds of kilometers away. Assessing China Tobacco's responsibility in causing deaths is much simpler. The company is vertically integrated, meaning that it controls most of the steps involved in turning a tobacco leaf into a cigarette. And since it's a legal monopoly in China, it's made and sold almost every cigarette consumed in the country, and has for decades. The WHO uses data from a study called The Global Burden of Disease to help estimate the causes of illness and death all over the world. Their work estimates that between 1990 and 2023, there was 68 million tobacco related deaths in China. And anything tobacco related is somehow involved with China Tobacco and its predecessors. Even the study's most conservative estimate, 59 million deaths, is so high that there's no way to conjure up another single fossil fuel, food or alcohol company remotely responsible for that much death. Every year, 2.5 million Chinese citizens die from tobacco. And the number is only expected to increase. Not least because of China Tobacco's sales tactics.
[12:26]Like other tobacco companies, it seeks to convert young people into lifetime customers. One of the more significant tobacco control measures that has been undertaken by China in the last 10 years was that Xi Jinping did decree that government officials should no longer smoke in public or smoke on television. Now, among young people, especially in this more cosmopolitan cities like Beijing or Shenzhen, Shanghai, vaping, e-cigarettes, other types of nicotine products are becoming more popular. And this is a challenge for China Tobacco for the state cigarette monopoly. Because overwhelmingly, those products are made by Chinese private companies and not by the state cigarette company. So one of the interesting aspects of China Tobacco not just being the country's sole cigarette maker, but its tobacco regulator, is that it in turn gets to regulate e-cigarettes and other nicotine products. Now, as you might expect, they've done so in a way that favors their own cigarette business. For instance, if you want to have a lemon or mint flavored cigarette, those are banned in a lot of countries, but not in China. However, if you want to have a lemon or mint flavored vape, that's been banned by China Tobacco. They've said, you're not allowed to sell those here. And the reason that we're doing that is because flavors like that attract children. The number of Chinese people with lung cancer and heart disease is only growing. It's a state sponsored public health crisis. A crisis that will cost the country in the long run, but not the state. That's because China's basic health insurance plans only cover a fraction of the cost of treating diseases like lung cancer. The health costs of smoking will have wide ramifications on Chinese society and on the Chinese people. But they won't hit the government's purse in the same way that it has in the West. Good evening, remember the date, the 20th of June, 1997. It was on this day that the attorneys general of more than 40 states said in Washington that they had finally beaten the tobacco industry into submission. If you look back at one of the most important moments in the history of tobacco, it was this lawsuit brought against the tobacco companies, not by the US federal government, but by state attorneys general. who banded together to sue the tobacco companies. We had to punish this industry in such a way that everybody in this country, and everybody in this world would recognize that they had paid a higher price than any other corporation in history. And the reason state attorneys general sued them is because the state governments were being bankrupted by the health costs of paying for their citizens' health care, who were having long, difficult deaths essentially, that were very expensive and involved lots of medical care. In China, that's not the case. And so there's no sort of functional financial driver for tobacco control in the same way that there has been in some other countries.
[15:37]Up until the end of the 20th century, Big Tobacco seemed unstoppable in the West, thanks to mass production of cigarettes and aggressive advertising. Worldwide, cigarettes are associated with glamour, freedom, modernity. Movie stars, athletes and even doctors are often seen endorsing tobacco. Try Camel yourself, the cigarette so many doctors enjoy. Until the health consequences become undeniable. In 1964, the Surgeon General's report declares that smoking is linked with lung cancer, a fact that Big Tobacco had been trying to cover up and discredit for years. The landmark report led to Congress requiring warning labels printed on cigarette packaging. And in the decades since, more and more countries have passed more and more anti-smoking measures. In the United States and other countries, high taxes on tobacco and public awareness of its health hazards led to dramatic shifts in attitudes toward smoking and a steady global decrease in consumption. Now, you see more and more countries implementing public smoking bans. If you can't smoke in a restaurant, if you can't smoke in a bar, if you can't smoke in a cafe, all of a sudden, your friends are inside having a good time, eating, drinking. If you're the smoker, you're outside by yourself on a street corner. And effectively, it becomes a habit that's no longer culturally or socially acceptable. And that's what we've seen in many countries around the world. But what happened in China is different. China did not fulfill that commitment to pass a smoking ban in public places. In 2016 and 2017, Xi Jinping tried and effectively, it was stopped by China Tobacco. What we saw in the years after that was a number of Chinese cities passing their own smoking bans. But we saw that China Tobacco by 2022, 2023, had swung into action to stop smoking bans at a municipal level. In the last 20 years, the rest of the world has managed to reduce the adult smoking rate from 34% to 23%. If China had followed the global downward trend, there'd be about 80 million fewer people addicted to tobacco now. And China did pledge to adopt the same anti-smoking measures that successfully let other countries to reduce consumption so dramatically. Along with 167 other countries, in 2005, China signed the same major WHO treaty aimed at controlling tobacco internationally. It vowed to protect its citizens from the vested interests of the tobacco industry. This treaty was significant globally. And since it was signed, tobacco use rates around the world have declined significantly in India, in Brazil, in the United States, in Western Europe, and Latin America. Rates have just plunged. In China, they've barely budged. Most efforts have systematically been bulldozed by China Tobacco.
[18:33]China Tobacco found sneaky ways to get past the commitments of the WHO treaty. For instance, they were involved in the translation of the treaty into Chinese, and made sure the language was weaker than in the original.
[18:47]Another way they undermined the treaty is through warning labels on cigarette packages. This was one of the key points that China agreed to when signing the treaty. The warning labels were supposed to be large and hard hitting. But China Tobacco managed to overturn these decisions. In China, the labels are much softer and easier to miss. These are Zhongnanhai cigarettes, produced by Shanghai Tobacco, a major subsidiary of China Tobacco. So if you look at the Chinese cigarette warning labels today, you'll notice, it's just a text warning label and it blends in very nicely with the rest of the packaging. The content of the warning label says smoking is harmful to health, which is a very generic way of warning people about the health consequences of smoking.
[19:40]Zhongnanhai cigarettes were smoked by the characters on a popular TV show called Struggle. Kind of like a Chinese version of Friends. Around 2007, it became the go-to cigarette for young people living in big cities. Now that Struggle's original audience is no longer so young, Shanghai Tobacco has launched a new line of Zhongnanhai. The rebrand is meant to entice the next generation of smokers, younger millennials and Gen Z. Some Chinese cigarette brands are especially beautiful. There's the Chunghwa brand favored by Mao, still considered a premium cigarette. Apparently, the smoke tastes a bit like preserved plums. Other brands also use elegant packaging with patriotic imagery. China Superslims look like Chinese porcelain. Shangmao China has the giant panda as a mascot. And Double Happiness is associated with Chinese weddings. All these brands are owned by China Tobacco. Now if we're to contrast that with these cigarettes that I bought in Vietnam, Vietnam also signed on to the same WHO treaty. But when they designed their cigarette packages, half the space on the front of the package is a graphic warning label showing a diseased body part. The warning label itself specifically warns you that smoking causes heart disease. And we know from research that when you warn people about a specific health problem, they're much more likely to pay attention than if you just tell them something generic like smoking is harmful to health. Some countries go even further. This is plain tobacco packaging, a tobacco control strategy implemented by more and more countries, including the UK, France, Canada, and Australia. Cigarettes packaged without logos, just graphic health warnings and the official ugliest color in the world. The goal is to prevent teenagers from picking up smoking. Young people are particularly susceptible to flashy, attractive tobacco packaging. Plenty of research suggests that plain tobacco packaging helps prevent smoking. Australia credits the ugly packages with getting 100,000 smokers to quit within just one year. In contrast, China doesn't even require pictorial health warnings. Not only that, but Chinese cigarette packages often feature a deceptive marketing strategy. An advertising technique based on pseudoscience that other countries banned long ago. The packages will often display the precise tar content of a certain line of cigarettes. The idea is to highlight if a cigarette is low tar to seem like it's a healthier choice than higher tar cigarettes. But low tar cigarettes aren't actually less harmful. When Western tobacco companies pushed low tar cigarettes in the 20th century, lung cancer rates rose. Now this is one of the most interesting and deadly marketing frauds in all of human history.
[22:36]The supposed benefits of low tar cigarettes have been debunked. But for those who don't know it's junk science, low tar branding sounds pretty good. Smokers concerned about their health, but not quite ready to quit, will often assume low tar cigarettes are a safer choice. Especially perhaps in China, where cigarettes are still allowed to be advertised with safe sounding words like light, low, smooth, or mild. Words that other countries have either banned or heavily regulated. In China, 20% of all cigarettes sold are low tar, and that number is on the rise. China Tobacco keeps finding ways to obstruct prohibitions on advertising, proposals to raise taxes and other tobacco reforms. China Tobacco has used its might, its political power within the Chinese government to block a whole range of tobacco control and public health measures that researchers have known for years are effective at stopping smoking. But how does the company exercise so much power? This is a vast company with offices in every city and town of any significance all across the country. So literally, they have built in lobbyists there. The head of China Tobacco is one of the 50 most important officials in the Chinese Communist Party. So the political power, the breadth and depth of the company's political power was used to effectively not just stop smoking bans on the national level, but even in little cities and towns around the country.
[24:06]You see this failure to regulate smoking play out on a cultural level. There's packs of cigarettes laying at the gym, and there's a guy smoking in the elevator. The warning labels were written in English, which is as bizarre in China as it would be for the warning labels in Canada to be written in Chinese. a 50 year old Chinese man runs marathons, smoking 42 cigarettes. This is the place it shows no smoking. This guy is smoking inside. This is against the law. This is China. Over the last 60 years, global smoking rates have mostly fallen. Taxes, warnings and bans worked. And the 2005 WHO treaty is credited with being crucial in curbing Big Tobacco's power. Not in China.
[24:58]So can anything be done? Or are the health consequences unavoidable if a state is financially dependent on a deadly industry? State involvement in the tobacco industry doesn't necessarily mean that smoking rates will remain high or that tobacco control policies will be undermined. There are more than a dozen other countries around the world where the government still owns a major stake in a tobacco company. And there are plenty of countries where the tobacco industry is entirely in private hands that have smoking rates that are higher than China. That includes Indonesia, Turkey and some others. So there's nothing inherently wrong with the government having a role in the tobacco industry.
[25:42]It's just that in China, the government hasn't managed the conflicts of interest that come with being in the tobacco business and also being in charge of public health as well as they could have. In other countries, in Thailand, for example, smoking rates have dropped dramatically over the last 20 years, even though the government is one of the largest cigarette makers there. So clearly, there are ways that China's state ownership of a cigarette company could be accommodated, but China just hasn't, hasn't done the work to implement this. And now because the company is so large and so powerful and it makes so much money, making those changes has become very, very difficult. China Tobacco would like to sell more cigarettes overseas. And its exports have been increasing. It has investments in tobacco companies or joint ventures in a number of other countries, primarily in Asia. China is investing more in Africa and other places. China Tobacco is looking to follow suit to sell cigarettes in new places, develop markets, and also to buy tobacco leaf from other companies. So I think in the future, we'll see that it is becoming an increasingly global company. China Tobacco already exports their products to 125 countries on five continents. Pushing its cigarettes onto other nations is part of China's Belt and Road Initiative, their global infrastructure expansion. And it isn't always legal. In countries with no legal market for their cigarettes, China Tobacco operates through a convoluted network of subsidiaries. They hide behind shell companies and often work with smugglers to flood countries with their products. Still, the main market is domestic.
[27:25]China Tobacco takes great pains to gain favor with the public by investing in social products, like sponsoring elementary schools in rural, low income provinces. More than 100 tobacco schools are said to exist. Some are explicitly named after cigarette brands. It's like sending your kid to Lucky Strike Elementary. Some even have signs on the walls that say, Genius is from hard work, tobacco helps you excel. Plenty of people in China are outraged by this and other predatory practices of the tobacco industry. But lately, it's become even harder to combat China Tobacco's influence. Starting around 2017, 2018, things started to change. And they didn't just change around tobacco control. China started to become a much more authoritarian place. Xi Jinping, as we know, ended the tradition of staying in power for only two terms. And a whole array of sort of civil society, uh, functions began to disappear in China. And civil society groups and advocacy groups that were once tolerated, all of a sudden were no longer tolerated. And interestingly, that even happened in tobacco control, an area that you would think is absolutely non-political. And so, where previously you had lawyers taking China Tobacco to court, you had tobacco control groups being very outspoken in the press and in public forums about the company's harmful role in Chinese society. All of a sudden they're silenced. And that is a direct consequence of the rising authoritarianism in China that's taken place over the last seven, eight years. Well, given all of that, do you see any realistic path for reducing smoking in China? China's government has become so centralized that the one person who could have a significant impact on China's smoking rates right now is only Xi Jinping. However, I think over the course of time, in the years and decades to come, as China opens up more to the world as its population becomes more educated, and as habits change, I think fewer and fewer young people will be smokers in the future. Uh, and so I think there is some reason for optimism that 20 years from now, 30 years from now, smoking will be much less of an issue in China. The problem is is that in the short to medium term, the outlook doesn't look very bright. And there aren't effectively civil society organizations or other checks on the power of this company within China.
