Guangdong Provincial Tobacco Company Converted into Limited Liability Enterprise

11/15/2007

The former Guangdong Provincial China Tobacco Industry Corporation - the operator of the manufacturing sector of the tobacco industry in south China's Guangdong Province - has been converted into a limited liability enterprise known as Guangdong Provincial China Tobacco Industry Co., Ltd., in a new round of reform of the tobacco industry in line with the reform plan of the State Tobacco Monopoly Administration (STMA). On November 9, a grand ceremony was held to unveil the nameboard for the newly converted Guangdong Provincial China Tobacco Industry Co., Ltd., which has become the first provincial-level tobacco manufacturing enterprise in China with a Board of Directors. The conversion has enabled the tobacco industry of Guangdong to once again take the lead in the establishment of a modern enterprise system (corporate system) and improvement of the corporate governance structure on the part of China's tobacco industry as a whole. The move also signifies the prelude to a new round of large-scale reform of provincial-level tobacco manufacturing enterprises in China that has been planned for quite a long period of time. The former Guangdong Provincial China Tobacco Industry Corporation was one of the four provincial-level tobacco manufacturing enterprises in China designated by the STMA and China National Tobacco Corporation to conduct pilot projects of systemic reform leading to the establishment of a Board of Directors in each of them. As a subsidiary wholly owned by China National Tobacco Corporation, the newly converted Guangdong Provincial China Tobacco Industry Co., Ltd. will, in accordance with the requirement of the modern enterprise system, gradually develop a corporate governance structure in which all the functional departments of it will strive to fulfill their respective functions, check one another in business development and operate in a highly efficient way. Sources with the tobacco industry say that the establishment of a Board of Directors in each provincial-level tobacco manufacturing enterprise will not only contribute to strengthening supervision by China National Tobacco Corporation over the relevant tobacco manufacturing enterprises, but will also enable the relevant enterprises to enjoy greater independence and greater decision-making power in accordance with law, which in turn will be playing an important role in guaranteeing efforts of State-run enterprises to fulfill their responsibility of keeping and increasing the value of their assets, and in increasing the core competitiveness of tobacco manufacturing enterprises in China. After its incorporation in 2003, the former Guangdong Provincial China Tobacco Industry Corporation took steps to conduct strategic reorganization of its seven subordinate cigarette factories in Guangdong. It spent only two years turning itself into the first one of its kind in China to complete structural reform of the subordinate cigarette factories within the home province. It has succeeded in developing a new model of cigarette production with several producers in a same corporate governance structure that has proven to be successful in practice, and in enlarging the production capacity of leading cigarette brands, which has enabled the manufacturing sector of the tobacco industry of Guangdong to become one of the most competitive ones in the tobacco industry of China. In 2007, the newly converted Guangdong Provincial China Tobacco Industry Co., Ltd. will see its annual cigarette output increase to over 2 million cases (100 billion cigarettes), with the output and sales volume of the leading Double Happiness cigarette brand expected to top 1.2 million cases (60 billion cigarettes) for the first time ever, according to sources with the enterprise. With its sales already covering 29 Chinese provinces and provincial-level regions, the newly converted Guangdong Provincial China Tobacco Industry Co., Ltd. is planning to export cigarette products to more than a dozen other countries and regions including America and Australia this year. The newly converted Guangdong Provincial China Tobacco Industry Co., Ltd. is expected to generate nearly 14 billion yuan (1.85 billion U.S. dollars) in taxes and profits in 2007, which will double the amount generated in 2003, the year of incorporation of the former Guangdong Provincial China Tobacco Industry Corporation. Enditem