CNTC reveals huge profit

State-run cigarette company China National Tobacco Corp's (CNTC) net profit stood at 117.7 billion yuan ($18.6 billion) in 2010, the company revealed in its first-ever public disclosure of financial figures, according to an Industrial Bank Co report filed to the Shanghai Stock Exchange yesterday.

The bank said in the report that it was planning to sell a 5.2 billion yuan stake to CNTC, which required the disclosure of the tobacco company's financials. CNTC, the largest manufacturer of tobacco products in the world by sales, has not disclosed financial data for 2011.

CNTC's profit is close to Shanghai-listed China Construction Bank's 2010 net profit of 135.03 billion yuan, the third highest among the listed companies in China, according to data published by news portal website sina.com last year.

Chinese tobacco industry is a monopoly industry, and the production and supply chains are dominated by the government, which creates high profits, Li Chang'an, a professor at University of International Business and Economics in Beijing, told the Global Times yesterday.

"The tobacco industry is not the lifeblood of a country and the products are even harmful to people's health, so the government can't encourage the industry. However, the industry is a big source of tax revenue for the government and some local governments even regard it as a mainstream industry," Li said.

The tobacco industry paid 604.6 billion yuan in taxes in 2010, up 16.95 percent year-on-year, according to State Tobacco Monopoly Administration, the industry regulator. And the taxes reached 752.96 billion yuan in 2011, up 22.5 percent year-on-year.

But the monopoly is not beneficial for the development of the company as it makes it difficult to establish a large enterprise with global competitiveness, said Zhou Siran, an analyst at the CIC Industry Research Center.

The country needs to speed up implementation of detailed measures to encourage private investment in railways, urban utilities, finance and energy, the National Development and Reform Commission said on its website in December last year.

"The monopoly position of some State-owned companies should be changed gradually," Li said.

State-owned companies get favorable treatment by the government in some respects, such as easier access to bank loans and the right to use land, which puts private companies at a disadvantage, Li noted.