The five-year grant from the Fogarty International Center of the National Institutes of Health (NIH) was announced today (Wednesday, Sept. 25). It is part of the Fogarty center's International Tobacco and Health Research and Capacity Building Program.

The research addresses the rising epidemic of smoking in the world's most populous country. Cigarette production in China has nearly doubled since 1982, and there are now more than 320 million smokers there - a quarter of all smokers worldwide.

"Policy makers in China have been operating with little information to help them properly judge the true economic impact of reducing tobacco use in the country," said Teh-wei Hu, professor of health economics at UC Berkeley's School of Public Health and principal investigator of the study. "We will look closely at the economic costs of smoking and the cost-effectiveness of tobacco control intervention so officials can make decisions based upon solid data."

Research supported by the NIH grant will consider the economic impact of China's entry into the World Trade Organization, which requires China to open up its domestic tobacco market to foreign companies. Foreign cigarettes now cost twice as much as domestic brands, but China has agreed to cut import tariffs on cigarettes from 65 percent to 25 percent by 2004.

"The tobacco industry in China is already feeling vulnerable to the coming competition from foreign markets," said Hu. "U.S. companies such as Philip Morris and R.J. Reynolds have already set up joint ventures in China in preparation for the change."

An important part of the project includes establishing the framework for tobacco control research in China. Researchers at UC Berkeley will work closely with the World Bank, China's Ministry of Health, the Chinese Academy of Preventive Medicine and health economists from China's Beijing University, Fudan University and Sichuan University.

Co-investigators of the study at UC Berkeley include Kirk Smith, professor and chair of the Division of Environmental Health Sciences, and Katharine Hammond, professor of environmental health sciences.

To get a sense of the costs of secondhand smoke, Smith said the study will compare disease rates in non-smokers who live with a smoker with those who don't. In the vast majority of cases, the non-smoker will be a woman or child. Only four percent of women over 15 smoke in China, compared to 63 percent of men over 15.

"History has shown that one of the things that really helps get tobacco-control policies passed is public concern with passive smoking," said Smith. "It's one thing to say that smokers are only harming themselves, but quite another to say they may be hurting others, especially children."

Officials in China have been struggling to balance the health benefits of quitting smoking against the economic importance of the country's tobacco industry, which generated 11 percent of total revenues for the central government in 2000 from tobacco profits and tax. Tobacco production in China is government-run and provides a major source of income for farmers in poor regions of the country.

"This conflict of interest is a major dilemma for the Chinese government," said Hu, who published an analysis in the June issue of the journal Tobacco Control of how a tobacco tax would affect smoking rates and China's economy. Hu used published figures of tobacco production and consumption in China from 1980 to 1997 to calculate the impact of a cigarette tax increase.

Hu estimated that 5.76 million to 8.64 million smokers would quit if the price of a pack of cigarettes increased 10 percent, leading to an estimated loss of $142 million (11.74 billion Yuan) in earnings and revenue for the tobacco industry. Overall cigarette consumption would be reduced by 5.4 percent.

However, the extra tax revenue would generate about $297 million (24.58 billion Yuan) for the central government, more than offsetting the tobacco industry loss. The extra revenue could be used for rural health care, health promotion activities and to help tobacco farmers switch to other crops such as coffee, tea and flowers, said Hu.

Factoring in savings from reduced smoking-related medical care costs would add to the financial benefits for the government, saving up to $81 million (672 million Yuan). "It's a win-win situation for the central government," said Hu. "The same is true for other places that have raised the tobacco tax, such as California, England, Thailand and South Africa. They've all raised cigarette taxes and reduced consumption while increasing revenue."