BAT Butts Into China's Tobacco Market

Rivals are puffing to catch up now that the British tobacco giant has become the first foreign company granted full access to the world's biggest market

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May 11, 2001 at 4:00 AM UTC

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With an estimated 350 million smokers, China has been the tantalizing, unattainable prize beckoning Big Tobacco. The three largest multinationals -- America's Philip Morris (MO ), Britain's British American Tobacco (BAT), and Japan Tobacco -- have pined for access to the Chinese market, which has been largely closed to outsiders since the Communists nationalized foreign-owned tobacco operations after coming to power in 1949.

Now, one of the tobacco giants may have gained a leg up. BAT is putting the final touches on a deal with the Chinese government that should grant the company a sizable advantage over its rivals in cracking the Middle Kingdom's vast market, experts say. Japan Tobacco already has a tiny presence in China -- less than one tenth of one percent -- but BAT's announcement in early May makes it all but certain that the company will soon build a huge tobacco-processing plant at Mianyang, in the Sichuan Province. This would make BAT the largest foreign tobacco company operating in China.