AXAing tobacco and China

The announcement this week of AXA Insurance to divest its £1.5BN investments in tobacco is another step towards a smoke-free world. Perhaps a decision not driven by conscience in refusing to invest in cancer-sticks, given the EU announcement the previous week restricting Big Tobacco to allow only plain packaging for cigarettes. As well as the EU regulating for abolition of 10 packs (the casual smoker unlikely to graduate to a full pack of 20 and £10 cost) and menthol flavours, and tighter ecigarette use.

Surely on the latter the plethora of vaping flavours and cigarette lighters and rolling papers and machines creeping out of the smoking cabinet onto the newsagent’s counter need a tweak of legislation? A tweak not dissimilar to supermarkets moving sweets away from the tills and little fingers. AXA may well have realised their investments would in fact be almost worthless without the support of branding to differentiate the commodity. And to be fair, earlier in the year they also divested fossil fuels, so the move against tobacco may be part of that AXA shift. In China one of the few nations with an increasing smoker base, almost a million people will die each year.

And already the volume of counterfeit cigarettes is huge: US Customs states that almost all the illegal imports seized in USA are from China. A $400BN trade in total. And in Fujian alone over 200 workshops churn out illegal smokes – often fortified caves with ramparts and armed militias. As with tax havens, the UK is lagging behind with no central register of public sector investments in cigs – KCC to insist in investing £20M in Marlboro looks woefully old-fashioned if not downright idiotic while supposedly supporting the NHS and Trading Standards and Police in reducing both the legal and illegal tobacco trade. Similarly prisons suppliers such as Aramark providing a range of cigarettes to convicts seems both logistically expensive and an anachronism given the encouragement of no smoking cells.

The SDG30 Goals annually are rather weak on tobacco cessation with a vague goal of reduction – given that another billion smokers may die off in the 21st century before full abolition.

Although smoking is the tip of the spear on Goal 16 for Sustainable Consumption and Production, with a UK sugar-soda tax to be introduced in 2017 (can soda manufacturers really support 7-15 sugar cubes per can of full-fat soda for much longer before switching production to zero calorie only?) and San Francisco council already insisting on billboard advertising for soda to carry a health warning. Tighter regulation of obesity drinks and foods will surely follow, during children’s television at least, and already far-sighted companies such as Nestle are also emphasising their use in their CSR policies and Unilever too. Booze is already limited in its advertising exposure and emphasising sensible drinking at length, ahead of any reformulations of ABV or tightening of regulations for product in stores or bottle size. Given the tobacco precedent, sales of single cans of beer or smaller spirits bottles, or youth-friendly alcopops flavours will disappear amidst tighter store stocking regulations sooner rather than later.

Even coffee shops such as Starbucks could be taking the lead to do more on recycling coffee cups than mere landfill, to complement their Fairtrade work. And Fossil Fuels whether coal or oil or gas or fracking and even nuclear looks set to go the way of whale oil as a fuel and certainly as investments, with increases in divestment in cities such as Paris, Munster and Copenhagen last year.

Paradoxically only China may see a substantial increase in nuclear reactors given its reliance on coal for c.70% of energy generation with Inner Mongolia’s black gold classed as the Dubai of China and coal reserves in Mongolia too. Yet there is a price in air pollution affecting most of China’s larger cities: the birth defect rate in Beijing doubling and Shanxi coalfields a horrifying 30% of babies dying soon after birth and 40% with various disabilities for the rest of their life. The UK’s stillbirth and cot-death and air pollution deaths while appalling are not even close to that horror.

While Greenpeace warned of 1M tons of untreated electrical waste in China, way back in 2011, with for example toxic chromium in Yunnan, the hub-city for ASEAN, over 200x the safe limit. And in Kent the safety of Belgian and French nuclear reactors along the Channel coast will face ever more demands on safety and cleanup give the sabotage affecting Doels reactor prior to the Brussels airport/tube terror attacks, along with the safety problems at Dungeness.

The Chinese reliance on fossil fuel, 15.6% of global energy total in 2006 to 20.7% in 2030 and 16.6M barrels of oil will impact more than trade. With 80% of that oil imported it helps to drive both the Silk Road and Belt initiatives into Iran, and the Chinese naval strategy around the Paracels and Spratleys – the latter even further South than HCMC in Vietnam, and the new Chinese naval and submarine base at Hainan – usually a Chinese Hawaii holiday island. The announcement by Obama on lifting the Vietnam arms embargo no doubt linked to extra scrutiny of Chinese actions on the various reefs. China must surely with an eventual reunification with Taiwan in the next decade or so question what its navy would be for? Certainly pushing the US Fleet back beyond the island chains off the Chinese coast to Guam is not unreasonable.

Nor perhaps restraining the Russian Far East as only a sliver of a European power of only 8M people in the vastness of Siberia on China’s doorstep of 1.3BN people. But with the Department of Defence spending as much on its military as the rest of the world put together, the question is whether China would want to invest in guns and saber-rattling for almost-submerged reefs. Certainly Russia would face problems in developing most its European and Asian military again. Especially with almost 50% of US tax going on the military.

Surely China’s leaders would take a view that economic not military development would yield greater dividends in both peace and prosperity and the realpolitik of internal security as it scrambles towards regaining its world economic power as before the nineteenth century - but this time fully involved in the world. Shanghai has already built the equivalent of 334 Empire State buildings in the last decade or so - surely a better use of funds than ships and submarines. Much needs to be done: Wenzhou’s 2011 hispeed rail crash resulted in 39 deaths, a fall in use by over 15% and a lingering cloud over both corruption and how China is to be united through its huge distances, traffic jams on the road and car pollution combined with fossil fuel power station pollution.

But Chinese bases at Djibouti near to the Suez Canal, discussions around Viajes in the Azores and Mediterranean entrance, Walvis Bay in Namibia near the Cape, and even a Chinese military-run space telescope in Argentina all mark the keys to almost all the locks of a reworked Mahan naval strategy for the 21st century. Or perhaps just money frittered away before naval disarmament discussions and an India-China arms race rather than the priorities of an ageing population and improved healthcare system or revamping the education system – only now Chinese universities are entering the top 200 rankings.

For all its raw economic might as now the world’s 2nd largest economy, and innovations such as Huawei 100G telecoms, the sleeping giant of China may well have feet of clay relying on ghost town construction booms and fossil fuels, with riots in several cities over corruption and pollution and languishing only around 84th place in global GDP per head. More Algeria than Japan. And one linked to an increasingly unstable and deadly North Korea.

China may well move through the next stage of its economic development by concentrating on liberalising its markets for greater foreign investment, innovation rather than technology-copying and the murk of SOE corruption and shadow banking.

@timg33