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New Chinese Joint Venture

A new e-cig startup in the land where the device was invented promises to change the landscape for vaping and smoking in Chinese society, according to an an article in the stock watching news source The Street.

The Chinese tobacco market is the world's largest, according to the World Health Organization, with 325 million people lighting up daily. But the market is rigidly controlled by the state monopoly, China National Tobacco.

FirstUnion is a Chinese e-cigarette manufacturer that ships vaping products to more than 50 countries, and claims to be the world's largest e-cig producer. By the provisions of a joint venture drawn up yesterday, February 25, FirstUnion will be teaming up with Chinese cigarette-packaging firm Jinjia, the country's largest, to get "engaged in the development, production, and sale of electronic cigarettes for the domestic Chinese market." The start-up investment will be 100 million yuan (more than 16 million dollars). The article in The Street (by a commentator, and not necessarily reflecting The Street's view) believes this will be China's first "mass-market" e-cig, but also expects that the project will need government support, since the powerful state tobacco monopoly will be a competitor. Nonetheless, FirstUnion's webpage claims that the firm "changes the world with healthy smoking."

FirstUnion was founded in 2004, and today it makes 800 million e-cigarettes per day, an operation that puts on the order of 10,000 Chinese citizens to work. Its HQ is in Shenzhen, a Hong Kong area business center founded by the Communist government in 1979 in order to take advantage of the area's economic vigor, 20 years before the British protectorate was re-integrated into China.

Jinjia, founded in 1996 and also headquartered in Shenzhen, packages domestic cigarettes, more than a dozen of them, and has Russian and Indonesian cigarette companies as customers as well.

Some high level Chinese health authorities have been making noises lately about tightening up smoking restrictions, perhaps banning smoking in some public spaces, and reining in the nasty practice at government functions. Some commentators think this may work in favor of the new FirstUnion/Jinjia venture, opening up the door to vaping as an exit strategy from smoking. It seems that there is no regulatory aversion to vaping that would prevent such a development. But for the moment, cigarettes are still cheap in China, and smoking in public, even in restaurants, is the norm.

The electronic cigarette was invented in China in 2003, by Hon Lik, a scientist whose father had died of lung cancer. Chinese firms, many of them headquartered in Shenzhen, have remained among the world's leading suppliers of e-cigs, even after recent moves by American cigarette companies to move in and dominate the e-cigarette industry.