China's top economic planner, the National Development and Reform Commission (NDRC), said that the price controls on tobacco leaf have been abolished.
The move which comes more than a year after Communist Party leaders pledged to give the market a decisive role in resource allocation at a key meeting known as the Third Plenum, is expected to give the market a greater economic role. However, tobacco leaf prices are only a small factor in the cost of cigarettes so the move is unlikely to have a significant effect on smokers. The NDRC official Wang Shengmin said, "Leaf tobacco only accounts for a very small portion of China's agricultural market, and the relaxation won't cause much fluctuation of cigarette prices, as the cost of tobacco leaves usually accounts for about 5 to 10 percent of the final product. The tobacco price will be determined according to industrial supply and demand and company costs and profits."
With approximately 2.5 million tonnes of tobacco production a year, China is the world's biggest market for cigarette. Tobacco kills more than one million people in China every year, where some brands can be purchased for as little as 3 yuan ($0.49). Experts say the number of smoking deaths could triple by 2030. Yet the government efforts to curb smoking have had limited impact. Experts point to the state-owned China Tobacco Company that retains its monopoly on cigarette production, which accounts for nearly a tenth of national government revenue, as one of the biggest obstacles to anti-smoking efforts.
Besides tobacco, the NDRC removed the cost controls on 23 other commodities and services which included railway bulk cargo, parcels, passenger transport and explosives for civilian use.