The Asia-Pacific region's leading international tobacco supplier also has signed a land-use contract with the Mianyang city government to build a factory in the city in western Sichuan Province. The project will cover about 96 hectares, a company official said.

"Our past cooperation with the Chinese government proved to benefit both sides," he noted.

Officials of British American's China branch declined to reveal further details, while the Mianyang government refused to comment on the issue.

The central government officials, however, said foreign companies are still barred from investing in China's tobacco industry.

"According to the current state policy, a foreign-invested tobacco joint venture or factory isn't allowed to open in China," said Qu Meiyu, a director at State Development Planning Commission.

Qu also denied the government had received an application to set up a British American venture or had been informed about the deal.

The London-headquartered company has been cooperating with domestic industrial corporations to develop new technologies and pro-ducts since its entry into the Chinese market about a decade ago.

As the country's tobacco production technology failed to meet international standards, the government temporarily lifted its ban on foreign investment in the 1980s.

Following the relaxation, British American in 1991 teamed up with General Group based in northern Shandong Province to establish its first joint venture, Huaying Tobacco Co, which produces three cigarette brands for domestic and overseas markets.

At present, Huaying, the Sino-American Huamei Cigarette-making Co. in Xiamen City, Fujian Province, and the Shanghai-Hong Kong Gao Yang Cigarette-making Co. in Shanghai are the only three overseas-funded cigarette joint ventures on the mainland.

Qu noted that the domestic market is facing an over-supply of cigarettes, and the country's technology has improved.

"British American's move seems to contradict our measures to start closing small-sized cigarette factories and to limit cigarette imports," Qu said.

China, the world's largest tobacco producer, produced 33.3 million cargoes of cigarettes last year, up 1.5 percent from 1999, according to the State Tobacco Monopoly Administration. A cargo contains 50,000 cigarettes.

China, which supplies one-third of the global cigarette output, maintains cooperation with nearly 100 tobacco corporations in various countries and regions.

(China Daily 05/25/2001)