MICHELE NORRIS, host:

Here's a quiz question for you. What is the world's largest tobacco company? If you guessed Philip Morris or British American Tobacco, you would be wrong. The answer is the Chinese government.

As NPR's Louisa Lim reports, the tobacco business has been very lucrative for China but not for China's farmers.

LOUISA LIM: I'm in Yuxi in Yunnan in the southwest of China, and this really is the town that tobacco built. In particular, one cigarette factory, the Hongta, or Red Pagoda cigarette factory is responsible for this town's wealth. And I'm now standing on Hongta Avenue. To my right is the Hongta Hotel, to my left is the Hongta Sports Stadium. At the end of the road, there's a beautiful manicured hilltop park, which even has its own tobacco museum.

Tobacco taxes account for more than 80 percent of this town's revenue.

Mr. ZHENG: (Foreign language spoken)

LIM: Of course, the Hongta group is good, says Mr. Zheng, it's made Yuxi rich.

He's brought his five-year old grandson to look around the museum. How could this be a bad influence, he asks?

Mr. ZHENG: (Foreign language spoken)

LIM: So the walls of the museum are decorated with photographs of China's leaders smoking. I think this one is the most classic picture - it's Chairman Mao surrounded by one, two, three, four, five, six, seven, eight smiling beauties, all trying to light his cigarette.

Mr. ZHU BIAO: (Foreign language spoken)

LIM: But there's one omission here, as visitor Zhu Biao notices. There aren't actually any signs in the museum that point out that smoking is bad for your health.

(Soundbite of ad)

LIM: And despite attempts by anti-smoking campaigners, China is failing to curb smoking. This anti-smoking ad declares you can be more patriotic if you protect your own and other people's health. But the problem is, in this part of the world, many see supporting the tobacco industry as patriotic.

Matthew Kohrman from Stanford University, who researches tobacco in China, explains.

Mr. MATTHEW KOHRMAN (Stanford University): The industry in China is run by the Tobacco Monopoly Administration. This is one of the last bastions of the command economy system. Quotas are set, factories are required to meet those quotas. Once they meet those quotas, they are required to shut down.

LIM: For the farmers, some of whom still use horses and carts to travel, tobacco is actually extremely unprofitable. They told us they can make three to five times more growing vegetables, but many stick with tobacco since there's a guaranteed buyer, the state, and all kinds of other enticements.

Tobacco farmer Huang Mei describes how it works in her village.

Ms. HUANG MEI (Farmer): (Through translator) If you want to grow tobacco, then you tell village officials how much land you will use, and you get cheap fertilizer. They also teach you how to grow tobacco. Last year there was a drought, and the government gave us water. If we were growing vegetables, we wouldn't have had such treatment.

LIM: Wind chimes tinkle in the village, but the peaceful scene may be deceptive. According to a 2004 survey carried out by Berkeley professor Hu Tei-weh, 93 percent of tobacco farmers said if there'd been no government pressure, they wouldn't have grown tobacco. Many say the situation has improved since then. But one farmer who gives his name as Yang insists that in his village, most tobacco growers are forced into it.

Mr. YANG (Farmer): (Through translator) Local officials say every family has to grow some tobacco. Nobody does it willingly, since it does not make economic sense. We only receive half the subsidies, the rest is siphoned off by officials.

LIM: The Tobacco Monopoly Administration turned down a request for an interview, as did the Hongta Group itself. One thing, however, is clear: Such coercion could be explained by China's addiction to tobacco tax revenues, at all levels of the government. Matthew Kohrman again.

Mr. KOHRMAN: County officials are keen to see tobacco grown because it's really the only way that they, in terms of agricultural production, can finance themselves.

LIM: And that system seems unlikely to change. Here's one other reason why: The deputy director of the State Tobacco Monopoly's name is Li Keming. He's the brother of the man tipped to be China's next premier, Li Keqiang.

Smoking may be costing one million Chinese lives a year, but the anti-smoking lobby fears the tobacco industry's high-level political patronage means reform is unlikely to happen anytime soon.

Louisa Lim, NPR News, Beijing.

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