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Japan Tobacco Inc withdraws from Xiamen
By Zhang Lu (China Daily)
Updated: 2004-09-03 09:10

Japan Tobacco Inc, the world's third largest cigarette maker, has withdrawn its investment from Xiamen Huamei Cigarette Co Ltd.

This first joint venture in China's cigarette making industry is now wholly owned by its Chinese shareholder, Xiamen Cigarette Factory, ending a 18-year-long joint investment history.

It is reported that Xiamen Cigarette Factory paid a total of 150 million yuan (US$18 million) to acquire shares from Japan Tobacco and Huamei's other shareholder Xiamen United Development (Group) Co Ltd.

Xiamen Cigarette Factory started a production co-operation with the United States-based RJ Reynolds Tobacco Co in the 1980s, and then jointly established Huamei in 1986, to produce the Jinqiao and RJ's Camel brands of cigarette.

In 1999, Japan Tobacco acquired a stake in Huamei by buying shares in RJ Reynolds.

According to the agreement signed at Huamei's establishment, the co-operation should be terminated today.

"As the three shareholders have set different strategies for their respective development, we agreed to stop the co-operation," said Zhang Yuedong, chairman of Huamei and also party secretary of Xiamen Cigarette Factory.

After negotiation, the three sides chose to end the co-operation ahead of time, Zhang said.

Officials from the Japanese firm were not available yesterday for comment.

Till now, China has only had three joint cigarette making companies - Huamei, Rothmans Tobacco Co, and Shanghai Gaoyang International Tobacco Co Ltd, all approved in the 1980s.

When Huamei was established in the early stages of China's reform and opening up, the joint venture was a trial to learn from foreign firms' advanced management experience.

But today, the domestic tobacco industry is growing stronger, industry experts say.

"Successfully acquiring Huamei shows the increasing strength of Xiamen Cigarette Factory," said Wang Jianyong, director of the factory.

After the share transfer, the production base of Huamei now becomes the Jinqiao production centre of Xiamen Cigarette Factory.

An opening ceremony for the new production centre was held on Tuesday.

"We will continue to produce Jinqiao cigarettes and keep their taste and unique style, to satisfy market demand," said Wang.

Xiamen Cigarette Factory has decided to develop Jinqiao, as well as its other two famous brands Shishi and Chenxiang as key products for its future development, Wang said.

When China implemented a tobacco monopoly system, Huamei previously could produce only 30,000 cartons of Jinqiao cigarettes a year.

Xiamen Cigarette Factory plans to decrease the production of its other low-end products, and produce more Jinqiao cigarettes in the future.

Wang said the factory aims to produce 50,000 cartons of Jinqiao cigarettes this year, and 100,000 in 2005.

"With the three brands, Xiamen Cigarette Factory will grow much bigger and stronger," Wang said.

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