Marlboro cigarettes will be produced legally for the first time in China, the world's largest cigarette market, under an agreement announced on Wednesday between tobacco company Philip Morris International and China's state run tobacco company.

Under the agreement, Philip Morris, a unit of Altria Group, and a China National Tobacco Corporation (CNTC) unit will also form a joint venture to offer Chinese cigarette brands globally and export tobacco products and tobacco materials from China.
A small quantity of Marlboro cigarettes have been imported legally into China in recent years. But like other signature US brands, counterfeit Marlboros have been a fixture in China.
The ten-year agreement grants a license for the cigarettes to be made legally in China. "Investors have been waiting for concrete signs that Philip Morris is getting into China and today's announcement is strong evidence of this," Bonnie Herzog, analyst at Citigroup, said in a research note. Herzog, who rates Altria "buy”, said the CNTC controls 90 per cent to 97 per cent of the Chinese tobacco market.
The CNTC sold 1.87 trillion cigarettes in 2004. Philip Morris International shipped 761.4 billion cigarettes in 2004.
The companies expect the production of Marlboro in China and the sale of Chinese brands by the joint venture to begin in 2006. Neither expects the deal to materially impact financial results immediately. The joint venture will be 50 per cent owned by Philip Morris International and 50 per cent owned by China National Tobacco Import and Export Group Corporation, a unit of the CNTC. (pi)