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Last Updated: Friday, 16 July, 2004, 14:43 GMT 15:43 UK
BAT leads the way to China market
Chinese smoker
Chinese smokers puff their way through 1.7 trillion cigarettes a year
British American Tobacco has announced plans to begin operations in China - the world's biggest cigarette market.

The UK firm said it had won approval to set up a joint venture with China Eastern Investments Corporation.

The move will be the first major inroad by a Western tobacco firm into the Chinese market, which accounts for a third of global cigarette consumption.

BAT said it planned to build a $1.5bn (800m) factory, producing 100 billion cigarettes a year.

It is the first foreign company to be granted approval to build a cigarette factory in China.

Heavy smokers

The go-ahead for the deal comes after years of negotiations between the Chinese government and BAT, which is the world's second biggest cigarette maker.

We are committed to China for the long term
Paul Adams, BAT chief executive

The factory will manufacture BAT brands including State Express 555 and Kent.

Western firms - faced with stagnating home markets - are increasingly focusing on China, which has around 350 million smokers, buying 1.8 trillion cigarettes each year.

BAT chief executive Paul Adams said: "We are committed to China for the long term."

He said: "For us it represents a major growth opportunity, whilst contributing to the Chinese government's excellent efforts to continue developing the performance of the country's tobacco industry."

Health risk

BAT's decision to begin manufacturing in China gives the company a bigger toe-hold in the country than UK rivals Gallaher and Imperial Tobacco, which have struck distribution deals with Chinese tobacco companies.

Gallaher, the makers of Benson and Hedges and Silk Cut cigarettes, signed a deal last year with China's Shanghai Tobacco to distribute one of its brands in the country.

Earlier this year, Imperial Tobacco, which makes Lambert & Butler and Embassy cigarettes, struck a similar deal with Chinese tobacco giant Hongta.

The World Health Organisation says that smoking kills around one million Chinese people every year.

Health officials estimate that 60% of Chinese men over the age of 15 smoke.

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