Foreign Companies Not Allowed to Sell Tobacco

The new Measures for the Management of Tobacco License recently issued by the State Development and Reform Commission took effect on 7 March. Under the new measures, foreign-invested commercial enterprises or individually-owned businesses are not allowed to engage in the wholesaling or retailing of tobacco products, or engage in such business through franchise or other forms.

The new legislation will have a great impact on foreign retailers already operating on the mainland. The five-year tobacco licence held by most foreign retailers, such as Carrefour, Park N'Shop, 7-Eleven and OK, expires in 2008. Under the new measures, the licence will not be renewed upon expiry. Cigarette sales currently account for over 20% of the total income of convenience stores like 7-Eleven and OK. The new rules will cut into the sales revenue of foreign retailers, especially convenience stores.

As a compromise, foreign retailers can cooperate with domestic enterprises with the tobacco licence and sell cigarettes by renting their counters.