The northwestern city of Xian is using the counterfeit cigarettes to extract solanesol, a compound found in tobacco which is used to treat cardiovascular disease, it said.

"We used to incinerate the fake cigarettes, which is wasteful and causes air pollution," Xinhua quoted Zhou Yaqing, vice director of the provincial tobacco monopoly, as saying.

A kilo of solanesol is worth about $200, and 30 tons of tobacco leaf can produce up to 120 kilos, Xinhua added.

China is the world’s largest cigarette producer, with a growing market of about 320 million. Chinese cigarettes are also among the cheapest in the world — a packet can cost as little as 8 U.S. cents — and smoking kills 1.2 million people a year in China, according to the World Health Organization.

Fake cigarettes, made of poor quality tobacco and often topped up with wood chips, are commonly sold on Chinese streets.