Bloomberg News

China Leader’s Job at Odds With Tobacco Ties, Brookings Says

October 25, 2012

Chinese Vice Premier Li Keqiang

Li Keqiang, China's vice premier. Photographer: Ed Jones/Pool via Bloomberg

The brother of Chinese Vice Premier Li Keqiang, who oversees public health, should be removed from his post as a top official in China’s state-owned tobacco monopoly to avoid conflicts of interest, a report published by the Washington-based Brookings Institution said.

Li, set to succeed Wen Jiabao as premier early next year, could boost his reputation as a populist leader and deflect criticism from rivals if his younger brother, Li Keming, is transferred from his position as deputy director at China’s State Tobacco Monopoly Administration, Cheng Li, a Brookings senior fellow, wrote in a report. He said Li Keming’s prominent role in the agency that runs the world’s biggest tobacco company may have set back efforts to control tobacco in the country.

Public opinion in China is becoming more important on social issues including health, environmental protection and food safety, Brookings’s Li said today. China has more than 300 million smokers, and at least 1.2 million die from smoking- related diseases each year, a figure set to rise to 2 million a year by 2020, according to the report, released two weeks before China begins a once-a-decade leadership transition.

“In all these areas, I think leaders should set examples,” Brookings’s Li said in an interview. “Particularly now that many countries, including Russia and India, are paying more attention to public health issues.”

Government Revenue

The tobacco industry is more difficult to control because China’s government gets so much revenue -- 600 billion yuan ($96 billion) in 2011 -- from it, the report said. The industry, which makes 2.3 trillion cigarettes a year, consistently contributes 7 to 10 percent of annual government revenues, according to the report.

Brookings, a private nonpartisan research group based in Washington, got funding for the study from the Bill & Melinda Gates Foundation through the China Medical Board, an American foundation that seeks to advance health in China. Cheng Li is research director for Brookings’s John L. Thornton China Center, where he studies China’s elite politics. He dedicated the report to his brother, who died of smoking-related causes.

“Paradoxically, Li’s personal/family ties with the tobacco industry might have prevented him from making a real effort to constrain cigarette production and consumption in the country,” Brookings’s Li wrote in the report.

Market Control

The State Tobacco Monopoly Administration both runs and regulates China National Tobacco Corp., the world’s biggest cigarette maker with a market share about the size of Philip Morris International Inc. (PM:US) and British American Tobacco Plc (BATS) combined, the report said. The STMA should be separated from China National Tobacco and the industry should have a new regulator, the report recommended.

A person contacted by phone at the State Tobacco Monopoly in Beijing who didn’t identify herself said the administration doesn’t accept interview requests from foreign reporters. Li Keming didn’t respond to a faxed request for comment sent to a number on the monopoly’s website. Vice Premier Li Keqiang didn’t respond to a faxed request for comment made to the State Council Information Office in Beijing.

The volume of cigarettes sold in China is expected to keep rising from 2011 to 2015, London-based researcher Euromonitor International said in July 2011. It forecast China’s tobacco market will grow at an average 14 percent a year to hit 1.8 trillion yuan in retail sales in 2015, about the gross domestic product of Malaysia last year.

China National Tobacco controlled 97.9 percent of the domestic market in 2010, according to Euromonitor.

Tobacco Monopoly

Executives at the state tobacco monopoly, which also acts as a regulator, tout the cigarette industry’s growth like that of any state-dominated field such as steel or telecommunications.

The monopoly’s director, Jiang Chengkang, said on a visit to northeast China last year that the tobacco industry needed to “make new breakthroughs in technological innovation” and “improve product taste and development,” according to China National Tobacco’s website.

Li Keqiang’s tobacco ties stand in contrast to the family of his future boss, Vice President Xi Jinping, who is set to take over as general secretary of the Communist Party at its congress next month and president next year. Xi’s wife, the army folk singer Peng Liyuan, has served as an “Anti-Smoking Ambassador” along with basketball star Yao Ming for the Chinese Association on Tobacco Control.

“By doing so, she can help to gain popular support and political capital for her husband to consolidate his power,” Li said in the report. He said both Xi and Li Keqiang quit smoking “a couple of decades ago,” while 20 percent of the party’s 25- person Politburo still smoke.

Activist Efforts

Anti-tobacco activists have scored victories in China. In 2005, China ratified a World Health Organization initiative to reduce the production and consumption of tobacco, and Health Minister Chen Zhu was recognized by the WHO in July for his tobacco-control efforts.

China, which according to the report has a quarter of the world’s smokers, aims to ban cigarette advertising, promotions and sponsorship and raise tobacco product taxes and prices, the health ministry said in August. The country aims to cut the smoking rate among men to 40 percent by 2020 from 57 percent in 2002, the ministry said.

Those efforts are often stymied by China National Tobacco, which skirts advertising bans through charities and sponsorships, according to anti-tobacco activists. It funds schools throughout the country, including the Sichuan Tobacco Hope Primary School, the Xinhua News Agency reported last year.

Devastating Crisis

“Chinese authorities have been slow to acknowledge this increasingly devastating public health crisis,” Li’s report said. “Their hesitance to effectively curtail tobacco production and consumption is driven primarily by the fact that the tobacco industry is one of the largest sources of tax revenue for the Chinese government.”

Li Keming, who has worked in the tobacco industry for three decades, gets access to top officials when he travels across China, a fact that’s “highly unusual in terms of Chinese bureaucratic hierarchy and protocol,” Li wrote. One reason may be that local officials want to “curry favor with Li Keqiang,” he said.

Li Keqiang has told health ministry officials privately that tobacco control efforts can’t be real because of the industry’s contribution to the economy, according to the report, citing a conversation between Cheng Li and an unidentified public health official in 2011.

Zhejiang Visit

Li Keming visited coastal Zhejiang province in July, when he met Communist Party Secretary Zhao Hongzhu and other officials to “exchange views on the development of tobacco in Zhejiang,” according to a report on the tobacco monopoly’s website.

Brooking’s Li said in the interview that he hopes Li Keming “will be sensitive enough to volunteer to move to a different position, a different industry.”

“Chinese leaders in the future need to be sensitive about this; it’s in their best interest,” he said.

Transferring Li Keming out of the tobacco industry may make his older brother less vulnerable to political attack from rivals critical of his failure to curb tobacco more effectively while overseeing public health since 2008, the report said.

“Although the tobacco industry -- a formidable vested interest group -- may generate some political support for Li Keqiang, his family ties with the industry may become ammunition for his political rivals,” Li wrote.

The Campaign for Tobacco-Free Kids, which provided information for the report, is a partner of the Bloomberg Initiative to Reduce Tobacco Use, funded by Bloomberg Philanthropies. Bloomberg Philanthropies was set up by New York Mayor Michael Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP.

To contact Bloomberg News staff for this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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