China’s New Rules Offer Insight Into Future Domestic Market

China’s domestic e-cigarette market is going to look very different next year. Draft rules governing e-cigarettes were issued on Dec. 2 by the country’s tobacco regulator, the State Tobacco Monopoly Administration (STMA). While the entirety of China’s new draft rules for the regulation of vaping products are vague and still being reviewed by interested parties, the included standards for the manufacturing of vapor products do open a window into the future of China’s domestic vapor market.

The National Standards of the People’s Republic of China for e-cigarettes allows only for closed pod systems with tobacco-derived nicotine and tobacco-derived nicotine salts. Flavors will be allowed and cartridges can’t leak, according to a translated copy of the proposed rules.

Unlike other countries, China will only allow tobacco-derived nicotine. The rules do not allow for a synthetic nicotine. “Nicotine extracted from tobacco should be used, and the purity should not be less than 99 percent,” the standards state. “Benzoate, tartrate, lactate, levulinate, malate and citrate of nicotine are allowed, and nicotine for preparing the above nicotine salts shall meet the requirements of [the previous statement].”

However, synthetic nicotine will still be allowed in products for export. What isn’t clear is if that synthetic nicotine must be shipped into China premixed in PG and/or VG and held in bond or if a pure synthetic can be imported. “There’s no legal imports of nicotine as far as we can tell. There’s seems to be no leeway for legal imports of a pure synthetic nicotine. However, we think if people import e-liquids with nicotine as a certain percent of that, that’s okay,” an industry representative told Vapor Voice and asked not to be named because they didn’t have permission to speak on the matter. “We don’t know if it’s 10 percent or 20 percent and it can only be brought into the country to be manufactured for re-export, that appears to be okay. That is just how we are interpreting the rule though, maybe someone else is seeing it differently.”

It also seems that the proposed rules also do not allow for a company to import finished vaping products into China and then sell them domestically without having a license and being registered with STMA (local companies will also need licenses). However, the country will continue to encourage exports, and wants domestic manufacturers to develop markets overseas.

“What they’ve really done is they’re clamping down on anything that is destined for the domestic market,” the source said. “They’ve also tapped into the tax department. Any time a manufacturer wants to manufacturer an e-cigarette or parts for an e-cigarette, they have to have a local representative from the taxation bureau there. And each day’s production that they run, they have to pay tax on those products at the end of that day. They’re clamping down in terms of what people can do as well as trying to ensure that they collect relevant taxes from all the manufacturers.”

Chinese vapor manufacturers are still waiting to understand what needs to be done officially for a company to produce vaping products for the international and/or domestic market. “We’re still waiting on that. The important piece isn’t the product standards,” the source said. “What I’m really interested in is the registration process, who’s allowed to do what, who has to issue licenses, because now there’s an emergency management bureau involved, not just STMA, so it’s a lot of people. We’re also trying to figure that piece out.”

China’s product standards do clarify what types of products China will allow domestically. The country will only allow closed-pod systems to be sold, stating that “devices and cartridges using e-liquid should have a closed structure to prevent artificial filling.” Additionally, flavors will be allowed for now, but flavors are only approved under a “temporary permit for additive in e-vapor matter” and any substance or flavor not listed “shall be used only after being proved to be safe and reliable by risk assessment,” the standards state. The listed additives include numerous flavoring extracts such as coffee, cocoa, prune and vanilla bean.

The standards only allows for a maximum amount of nicotine of 20 mg per milliliter (mL). The source also said that the way he interprets the rules is that vape symposiums, such as the recently held 2021 IECIE Shenzhen eCig Expo (held Dec. 6-8), wouldn’t make sense to be held in China anymore.

“I can’t imagine, if they’ve really taken bookings and got one on the cards currently, that they will cancel it, but we’ll see shortly,” the source said. “The Chinese domestic market is off limits to outsiders now. Moving forward, I don’t see a place for [trade shows] in this market anymore.”

For China’s domestic manufacturers the outlook is grim. While international players will still survive, they are still confused about what will be expected when the rules are finalized. Stock shares for RLX, China’s largest domestic brand, fell by more than 16 percent after the SMTA released the proposed rules. In Shenzhen, the capital of global vapor manufacturing, the industry is in a state of shock, according to the source.

“Everybody, from big to small, is scrambling to try and find out how this relates to them,” the source said. “They all have to register immediately with State Tobacco Monopoly to continue doing business. They have to register what they’re going to be manufacturing, what their exports are, where they are going. It’s a complete disaster.”

A more detailed version of this story will appear in the next issue of Vapor Voice.