BEIJING (Reuters) - Earlier this year, the city of Hangzhou, home to the internet giant Alibaba, was poised to join Beijing, Shanghai and a handful of other urban areas in banning smoking in public places, part of a long-running campaign against tobacco use in China.

A man smokes a cigarette while looking at his mobile phone in front of a propaganda banner in Kunming, Yunnan province, China May 30, 2018. REUTERS/Wong Campion

But, like the country’s broader anti-smoking campaign, the Hangzhou initiative then lost momentum. Instead of blanket bans on smoking in public indoor spaces, the city revised its regulations to allow smoking in designated areas in train or bus stations, as well as in bars or karaoke clubs.

Opposition to the tougher rules, according to a top national tobacco control official, was led by China National Tobacco Corp, the state monopoly.

The company has reported rising sales over the last year, which anti-tobacco campaigners say has helped to stall earlier successes in the national anti-smoking campaign.

The official declined to be named, citing a lack of approval to speak to the media.

“When it comes to the tobacco industry’s obstruction and interference in implementing specific tobacco control articles, China has a serious problem,” Yang Gonghuan, the former head of tobacco control at the Chinese Center for Disease Control and Prevention, said during a recent launch event for her book, “Tobacco Control in China.”

In the book, Yang details what she characterizes as China Tobacco’s efforts to thwart control measures by interfering with policy-making, spreading “false science” about the safety of low-tar cigarettes, promoting a smoking culture and criticizing anti-tobacco advocates for working with foreign organizations.

The company did not respond to faxes and phone calls seeking comment.

In official statements, China Tobacco says it is trying to improve public health by fulfilling tobacco control obligations and working to decrease things like tar in cigarettes.

China Tobacco is huge, powerful and opaque.

Selling 98 percent of the cigarettes in China under brands such as Red Pagoda Mountain and Double Happiness, the unlisted company is the world’s biggest cigarette-maker by volume, generating revenue last year of 1.1 trillion yuan ($172 billion).

It accounts for roughly 7 to 11 percent of China’s taxes.

EARLY PROGRESS

In 2015, after China rolled out measures under the World Health Organization’s tobacco control convention, including a tax hike, health warnings on cigarette packets, advertising curbs, and public smoking bans, tobacco sales dropped for the first time since 2000. That trend continued into 2016.

In Beijing, tobacco sales dropped 8 percent in 2016 after smoking was banned in public places in July 2015, according to state media.

“When they saw the statistics, China Tobacco started to fight the policy at all costs,” the tobacco control official said.

In 2017, China Tobacco sold 0.8 percent more cigarettes than the year before; in the first three months of 2018, sales rose 4.15 percent by volume, according to official data.

CHEAP SMOKES

China produces and consumes the most tobacco of any country: over 300 million Chinese smoke, including more than half of all adult men, according to Yang.

Social acceptance of smoking in China, where cigarettes are often given as gifts at weddings or business gatherings, combined with low awareness of the associated health risks, means demand remains high despite 1 million tobacco-related deaths each year, according to her book.

Cigarettes are also cheap, even as other goods have become more expensive.

The affordability of average-priced brands, about 13 yuan per pack, and for cheaper brands, as little as 3 yuan, halved between 2001 and 2016, when taking into account inflation and rising income levels, according to research by Zheng Rong at the University of International Business and Economics in Beijing.

Illegal online sale of cigarettes via food delivery platforms, arcade games with cigarettes as prizes and thin cigarettes targeting female smokers have also fueled sales in recent years, according to an article by Zheng Pinpin, a public health researcher at Fudan Univesity in Shanghai.

‘FIREWALL’ HOPES

In March, China’s parliament announced a reshuffle of the body in charge of implementing the WHO measures, putting the National Health Commission in the lead, which sparked hope among tobacco control advocates that the industry would be cut out of regulation.

“One would like to see, such as in Thailand, a process where a firewall is built between the concerns of the industry and its interests and any policymaking,” Gauden Galea, the WHO’s China representative, told Reuters.

Yet, anti-smoking advocates worry that heavy reliance on tobacco tax revenue undermines political will to curb smoking.

An increase in the wholesale tax from 5 percent to 11 percent in 2015 is largely credited with the 2.3 and 5.6 percent drops in cigarette sales volumes in 2015 and 2016, respectively.

But Hu Teh-wei, an expert on China’s tobacco industry at the University of California, Berkeley, said that impact had now been blunted and that significant tax hikes were needed to seriously deter smokers, a prospect he said was not currently under consideration in China.