British American Tobacco Plc. is looking to invest some 250 million pounds (US$382.5 million) in a factory on 96 hectares of land in Mianyang, Sichuan Province, according to several media reports.

"We're currently in discussions with the Chinese government and have promised them we won't discuss details of the negotiations," the company stated yesterday in an e-mail to Shanghai Daily.

If BAT is successful in signing a deal, it will become the first new tobacco joint venture set up in China since the early 1990s.

While the central government approved the creation of three tobacco joint ventures prior to 1993, the failure of those three enterprises to earn significant profits has led officials to hold off on allowing more overseas investment in the tobacco market - although joint ventures remain technically legal.

The three previous joint ventures include BAT-invested Huaiyang Tobacco Co. Ltd. in Shandong Province, Sino-American Huamei Cigarette Making Co. Ltd. in Fujian Province, and Shanghai-Hong Kong Gao Yang Cigarette Making Co. Ltd. in Shanghai.

Gao Yang has given up producing its own brands of cigarettes due to poor sales just two years after it was founded. It now processes products that belong to Shanghai Tobacco Group, its local investor.

Foreign companies looking to set up a joint venture in China must first submit an application to the State Tobacco Monopoly Administration, a step BAT has yet to take, said the organization's Qu Meiyu.

(Shanghai Daily August 13, 2002)