BAT signs giant China joint venture

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British American Tobacco (BAT) owner of State Express 555, Lucky Strike, Pall Mall and Dunhill brands has announced it has signed a deal with the Chinese government for a 237 acre (95 hectare) manufacturing site in the world's largest cigarette market.

The joint venture was unveiled at an analysts presentation yesterday of BAT's first-quarter profits which more than doubled. Although talks continue on the details of the proposed venture, BAT said it had been given permission by the Chinese government to discuss it publicly. In a statement BAT chairman Martin Broughton said the Chinese government has "granted its approval for the signing of an agreement this month," securing the rights to build a factory in Mianyang in Sichuan Province. BAT declined to comment on the stake it might have in the venture, or who would have management control and which brands would be manufactured. State Express 555 already has a huge market in China and is a likely candidate. Currently it has large import tariffs attached to it and the Chinese authorities have cracked down on smuggling of cigarettes into China in the past few years.

The new factory will rank among the largest in the world and is the result of almost 20 years of discussions and diplomacy in which BAT, and rivals Philip Morris, RJR and Japan Tobacco, lobbied to become the first foreign tobacco company to sign a major joint venture in China.