WHEN China started opening up in 1978, its first economic reforms included raising the prices it paid to farmers for their crops. The decision, not surprisingly, led to bumper harvests. Controls on procurement prices for most farm products were eventually scrapped—but not on tobacco leaves. Only this year, nearly four decades later, will the government at last stop fixing their price.
Even as market reforms swept the countryside under Deng Xiaoping, the government kept its grip on the hugely lucrative tobacco industry. Tobacco companies remained exclusively in state hands. Prices of the leaf were set in order to assure farmers of an income and dissuade them from switching to other cash crops. Local governments wanted to boost tobacco farming, not least because of the taxes it yielded. Centuries-old taxes on every other crop were abolished in 2006, but not those on tobacco. The southern province of Yunnan derives nearly 80% of local revenue from the crop. The cigarette industry stuffs the central government’s coffers too, accounting for over 7% of its revenues.
Soaring demand for tobacco products has helped to keep the system (sort of) working. China’s 5m tobacco farmers now produce more than 3m tonnes of tobacco a year, 43% of the world’s total—more than the combined output of the next nine tobacco-producing countries. China is home to a third of...Continue reading
No comments:
Post a Comment