There is a straightforward economic case based on simple externality arguments for public policies to avert a tobacco-induced health catastrophe in China. This contrasts with the situation of developed countries where controversial internality arguments must be invoked to provide an efficiency-based rationale for policy. WHO evidence suggests that there is a widespread lack of knowledge on the adverse health implications of smoking among Chinese. This contributes to an asymmetric information rationale for tobacco control policy. In addition, there are severe direct externality issues associated with secondary tobacco smoke. Despite excises, the price of cigarettes in China remains low by international standards. In addition, attempts to implement “smoke-free” zones in public areas have so far been unsuccessful. Candidate policy reforms include improved public provision of information on the health impacts of smoking, higher tobacco excises and increased efforts to encourage those who wish to continue smoking to do so by avoiding secondary tobacco smoke impacts on others.