BRITISH American Tobacco's bid to boost its foothold in China, the world's biggest cigarette market, has been undermined by the state cigarette company.

The major Southampton employer has ambitious expansion plans and thought it had won the backing of China's all-powerful state tobacco bosses.

But Zheng Benfu, general manager of China Tobacco Import and Export, an arm of the country's tobacco monopoly, said the country would not permit any further joint ventures with foreigners because the market was already "saturated".

BAT's State Express 555 brand, much of which is made at its Millbrook factory where 1,300 people are employed, is popular in the region, where Western numerals are all most locals can understand on the packet.

Earlier this year, BAT announced it had got the green light to build a £800m factory capable of producing up to 100 billion cigarettes a year in China.

The statement was rejected by the tobacco monopoly but reflects turmoil between it and China's outward-looking politicians, who favour increasing competition through foreign investment.

Cigarette sales are a cornerstone of the Chinese economy and are thought to contribute as much as ten per cent of national revenues, making the introduction of foreign competition a controversial subject - not least with the China National Tobacco Corporation the world's biggest cigarette maker.

But the reason why BAT is determined to get into China is easy to grasp - one in three of the world's smokers lives there.

But all is not lost for BAT. Mr Zheng did not mention BAT by name and his agency has accepted in principle plans to co-operate with foreign companies on research, tobacco importation and manufacturing machines.