China’s cigarette market: how a state monopoly shapes retail, products and partnerships

Updated on May 5, 2026

China is still the world’s largest cigarette market, but smoking rates are falling slowly and every lever of the business, from price to shelf, sits with one state-owned company.

By Daxue Consulting

In China, cigarettes are a business of the state. China National Tobacco Corporation (中国烟草总公司) produces around 2.5 trillion cigarettes per year and is estimated to hold 97% of the domestic market (Tobacco Tactics, 2023). The best-selling brands, like Zhonghua (中华), Yuxi (玉溪), Furongwang (芙蓉王) or Yunyan (云烟), are the ones found behind the counter of every convenience store.

However, the number of smokers is going down. According to China CDC, which surveyed more than 190,000 people, 23.2% of adults were smoking in 2024, while they were 26.6% in 2018 (China CDC Weekly, May 2025). Production has grown by only 0.9% per year on average since 2018 (Tobacco Asia, 2025), and premium brands are suffering as people give fewer cigarettes as gifts.

In this article, we will see how the monopoly works, how cigarettes are sold, what the rules are for e-cigarettes and what role is left for international companies.

Cigarette market in China: key figures

Exhibit 1: Smoking is declining slowly, while production stays close to its peak

Sources: as listed in each row; table designed by Daxue Consulting.

A single company regulates, produces and sells

In fact, it is one organization with two names. On one side, the State Tobacco Monopoly Administration (国家烟草专卖局) regulates the market, and on the other side, China National Tobacco Corporation produces and sells. Production is organized by provincial companies and their factories, Hongta in Yunnan for example. For distribution, cigarettes go through the commercial companies of the monopoly to the licensed retailers, and prices are decided centrally, with some differences by region and by type of shop.

The monopoly is also important for the budget of the state, as it is estimated to bring 9% to 12% of total state revenue (Tobacco Tactics). This is the reason why public health objectives and industry objectives have to live together. At the National Tobacco Work Conference of January 2026, the message was a “stable operation of the market” and more innovation in “Chinese-style cigarettes” (中式卷烟), while the fight against smuggling and counterfeits became stricter (Ifeng (凤凰网), January 2026).

Smoking rates are falling faster in large cities

Between 2018 and 2024, the adult smoking rate lost 3.4 points. If we apply 23.2% to the population aged 15 and over in China, which is about 1.2 billion people, we still have around 280 million smokers, close to the 270 million estimated by Tobacco Tactics. So the decline is real, but it is slow: with half a point per year, China loses only a few million smokers every year. The authors of the study think the Healthy China 2030 target of 20% can be reached at this speed.

In large cities, it goes faster. In Shanghai, 19.2% of adults were smoking in 2023, and it was the thirteenth year of decline in a row. The gap between men and women is still very large there: 36.3% of men smoke, against 0.8% of women (The Paper, May 2024).

In China, cigarettes are also a social object. Offering a pack of Zhonghua to a business partner or at a wedding shows status, and this is why premium brands make so much of the value of the industry. When people started to give fewer gifts, this segment was the first one to suffer. In 2025, high-end brands were selling slowly and retailers had too much stock, so the premium stock they are allowed to keep was reduced from seven cartons to six, five or even less (Tobacco Asia, 2025).

Cigarettes are sold through a closed, traceable retail system

Licensed retailers only. To sell cigarettes, a shop needs a tobacco retail license, and each pack has a code linked to the license of the shop selling it, so if the code does not match, it can show a fraud. Most cigarettes are sold in tobacco and alcohol shops (烟酒店), convenience stores, supermarkets and small grocery stores. In the large cities, convenience store chains are more and more important, as we explained in our analysis of convenience stores in China.

No online sales, no advertising. Cigarette advertising is banned in China since 2015 (Tobacco Tactics). It is not possible to sell cigarettes on e-commerce platforms, and in 2019 the platforms also had to remove e-cigarettes (China News Service (中国新闻网), March 2022). What is left for marketing is mainly the pack, the shelf and the advice of the shop owner.

Slimmer, lighter, better value. For product development, the industry first worked on special filters, then on low-tar and ultra-low-tar cigarettes, and more recently on cheaper “high value for money” products (Tobacco Asia, 2025). Slim (细支) and mid-slim (中支) cigarettes are now a big growth area for China Tobacco, in particular with smokers in cities. However, we did not find a reliable recent figure on their share of sales.

E-cigarettes are an export industry, not a domestic market

Most of the e-cigarettes in the world are made in China. In 2024, exports were around US$11 billion, and the first destination was the United States (US$3.7 billion), before the United Kingdom, South Korea and Germany (Yicai Global, January 2025).

For the industry, this is the main risk. The United States alone bought about one-third of the exports in 2024, so if the US changes its rules on disposable vapes or on imports from China, Chinese manufacturers will feel it directly, and there is no domestic market big enough to compensate.

In China, the E-Cigarette Management Measures have been applied since May 1, 2022. Since then, e-cigarettes are under the license of the tobacco monopoly and it is forbidden to sell flavors other than tobacco (China News Service, 2022). A lot of single-brand vape shops had to close, because they now have to respect the same distance rules as tobacco retailers. The use is still low: in Shanghai, 1.4% of adults were using e-cigarettes in 2023 (The Paper). China Tobacco also developed its own heated tobacco products, for example the Kuanzhai Kungfu brand (Tobacco Tactics).

Foreign tobacco companies work as partners of the monopoly

Exhibit 2: International groups operate in China through licenses and joint ventures

Source: Tobacco Tactics (2023); table designed by Daxue Consulting.

How the market has changed over the past decade

Exhibit 3: Fewer smokers, tighter rules, and a new export industry

Daxue Take: implications for international companies

The cigarette market in China works more like a regulated system than like a consumer market. The important decisions are taken by the monopoly and by public health policy, not by consumers.

1. For international tobacco groups, growth in China depends on what is agreed with China Tobacco: licenses, joint ventures and export of Chinese brands. If the China plan of a group is based on direct competition in retail, it will probably not work with the current structure.
2. For suppliers of packaging, filters, flavors and machines, China Tobacco is one of the biggest buyers in the world. A supplier who can meet the technical standards of the monopoly for lower-tar and slim cigarettes may find demand in its “Chinese-style” innovation agenda, at least as long as product upgrading stays a priority in the national tobacco conferences.
3. For convenience chains, cigarettes bring traffic but there is no freedom on price. A chain selling a lot of cigarettes may find more value in what customers buy together with the pack than in the cigarettes themselves.
4. For e-cigarette manufacturers, China is a production base, not a market. When export markets make their rules stricter, like several did after 2021, the Chinese market will probably not absorb the difference as long as flavors are banned.
5. For all players, the public health trend is going in only one direction. A plan counting on more smokers in China would be built against the data.

What to watch next

• The next China CDC adult smoking survey, and whether the 20% target for 2030 stays on track.
• Instructions from the January National Tobacco Work Conference on product structure and premium stock.
• E-cigarette export data, as the United States and Europe change their rules on disposable vapes.
• Any change to the licensing of heated tobacco products in China.

FAQ about the cigarette market in China

Who controls the cigarette market in China? China National Tobacco Corporation, a state monopoly founded in 1982, which holds about 97% of the domestic market and also operates as the State Tobacco Monopoly Administration.

How many people smoke in China? About 270 million people, according to Tobacco Tactics. The adult smoking rate was 23.2% in 2024, down from 26.6% in 2018, according to China CDC.

How are foreign cigarette brands sold in China? Through agreements with China Tobacco. Philip Morris has made and sold Marlboro in China under license since 1994, and BAT sells State Express 555 through a joint venture.

How are e-cigarettes regulated in China? Under strict rules. Since May 2022, e-cigarettes fall under the tobacco monopoly license, only tobacco-flavored products can be sold, and online sales are not allowed.

About Daxue Consulting

Daxue Consulting is a market research and strategy consulting firm focused on China. In regulated industries such as tobacco, alcohol and healthcare, Daxue Consulting combines desk research on regulation, store checks in licensed retail, interviews with distributors and industry experts, and consumer research. Related analysis: wine distribution in China and Chinese middle class. Learn more about our China market research services or contact our team.

Author: Daxue Consulting