Death of 3.5 Million Chinese Is Dismal Economics: William Pesek

Anyone who thinks smoking isn’t government’s business should consider one number: 3.5 million.

That’s how many people in the second-biggest economy will die each year from tobacco use by 2030, according to a report by prominent Chinese health experts and economists. More than lives will go up in smoke. So will productivity, public money and growth.

China immediately should raise cigarette prices, increase health awareness and ban smoking in indoor public places. Yet instead of acting to protect consumers’ health, greed is distracting Chinese leaders from doing the right thing.

Call it China’s fiscal addiction. The huge revenues rolling in from state-owned tobacco producers are trumping the desperate need for anti-smoking measures. Never mind that untold millions of lives are at stake in the nation with the largest number of smokers. Smoking is big, big business.

China isn’t alone here. From Tokyo to Jakarta, government policies are putting tobacco profiteers ahead of public health. This isn’t just shameful; it’s also dismal economics that imperils the region’s future.

Look, I don’t smoke -- at least not willingly. When you live in Japan, you’re pretty much a smoker. The reason: Japan Tobacco Inc., the world’s third-largest publicly traded cigarette maker, is 50 percent government-owned. Any government getting a piece of tens of billions of dollars of domestic tobacco sales each year has zero incentive to hurt business.

Cheap Smokes

Yes, Japan has discovered no-smoking sections in recent years. It also upped tobacco taxes by 40 percent in October. Yet cigarettes are still so cheap that friends overseas routinely ask me to grab a few cartons for them when I travel (Note to customs officials: I always say no).

Developing Asia is the real problem, though. As Western markets like the U.S. and the U.K. tighten the vise on the tobacco industry, Asia beckons. In this way, cigarette hawkers are hardly unique. Whether you make cars, shoes, air conditioners, wine or movies, Asia is where it’s at in terms of sales growth. Cigarette executives are merely operating in the best interest of shareholders.

Economies won’t be so lucky. Tobacco’s road to Asia jeopardizes the region’s potential. The costs will be counted in huge jumps in medical costs and lost productivity in a region that needs increased efficiency to move up-market from sweat shops to information-technology campuses.

Growing Risks

If you wonder why China isn’t taking these risks more seriously, look no further than its regulatory framework. Its State Tobacco Monopoly Administration sets policies and enforces them, while also overseeing the world’s largest cigarette maker, China National Tobacco Corp. Talk about a conflict of interest.

“A snapshot of China’s smoking problem now looks like America in the 1940s,” Zhao Ping, deputy director general of the Cancer Foundation of China and co-author of the above- mentioned report, told reporters in Beijing. “People just don’t know the health risks.”

That report claims that last year it cost about 62 billion yuan ($9.4 billion) more to treat people for smoking-related ailments than tobacco companies generated in profits. That may not sound terrible in a $5 trillion economy. The current death toll -- about 1 million Chinese per year -- also sounds small in a nation of 1.3 billion people.

The problem is the trajectory of costs and deaths if China leaves this problem untouched. Current estimates have China losing as many people to smoking in a year as Lithuania has people. The risk is that this figure understates future losses in China, and elsewhere in Asia.

Financial Stability

“There is a link between tobacco use and economic and financial stability,” Douglas Bettcher, director of the World Health Organization’s Tobacco Free Initiative, told Xinhua. “So the government can’t turn a blind eye to tobacco control.”

What’s frustrating is how avoidable this unfolding health crisis is -- and what it says about Asia’s leadership. These incestuous ties between government and tobacco profiteers are a microcosm of things to come in Asia. To me, it’s a bit like a public official lining his energy-policy task force with industry cronies. Its means things may not end well for Asian consumers who should be encouraged to smoke less, not more.

Consumer advocacy groups are beginning to push back, as American Idol” winner Kelly Clarkson can attest. Last year, she was embroiled in controversy over a concert in Jakarta that was sponsored by a tobacco company. After an outcry from Indonesian activists and fans, Clarkson dumped the sponsor.

We need more grass-roots pressure because not enough is coming from the public sector. Economic trends aren’t likely to generate much political will to rein in Asia’s growing tobacco habit. Not with governments struggling to generate tax revenues amid weak global growth.

Two years ago, top WHO officials said that 1 billion people might die of tobacco-related diseases this century unless governments get serious about this issue. As trends in China suggest, that prediction might end up being a conservative one. If so, Asia’s economic rise will come with a whole lot of coughing and wheezing.

Anyone got a light?

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Jakarta at wpesek@bloomberg.net

To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net

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