Alibaba International Station announced that, beginning May 1, it will no longer allow the sale of vaping products. The cross-border trade B2B e-commerce platform’s ban will include cartridges, e-liquids, hardware and all other vaping related products.
After the document was issued, many e-cigarette brands said that they will actively implement the regulatory requirements and stop the production of e-cigarettes with fruit flavors in the domestic market, according to dayday News. Therefore, under the new regulations, the prices of e-cigarettes have been rising. Many brands raised the price of their e-cigarettes with various fruit and soda flavors, with prices increasing between 20 yuan ($3.14) to 30 yuan ($4.71).
According to a report released by iiMedia Research, the retail sales of the global new tobacco market reached 360.5 billion yuan in 2021, an overall increase of 25.6 percent, while China’s domestic sales increased by 73 percent. In addition, according to the Blue Book of the Electronic Cigarette Industry in 2021, in terms of export, the total output value of electronic cigarettes exports reached 138.3 billion yuan, and there are more than 1,500 e-cigarette manufacturers in China.
Vapers in China have reportedly been stocking up on flavored liquids in anticipation of a ban. A staff member at a RELX store in Shanghai told Sixth Tone that his shop had seen an increased demand for flavored pods since the government announcement, with grape and cola-flavored varieties selling out almost instantly.
On March 11, the State Tobacco Monopoly Administration published the final “Management Rules for E-cigarettes,” which includes a ban on domestic sales of nontobacco-flavored e-cigarettes. The rules are scheduled to take effect May 1.
The move was welcomed by anti-vaping groups such as the Campaign for Tobacco-Free Kids, which said the rule would help prevent children from becoming smokers. “Children who use e-cigarettes are more than twice as likely to use cigarettes in the future, according to the World Health Organization,” said Yolonda Richardson, executive vice president for the Campaign for Tobacco-Free Kids, in a statement. “China’s new policy is the right move to protect Chinese kids from these addictive products.”
The flavor ban is part of a long list of new requirements for the vaping business. China’s new rules also ban refillable products and synthetic nicotine while limiting the strength of e-liquid to 20 mg/mL.
Manufacturers, wholesalers and Chinese retailers will be required to conduct all business on a “unified national electronic cigarette transaction management platform,” and exports will be restricted to vapor products allowed in the destination countries.
The new rules will force e-cigarette sellers like RELX to sell competitors’ brands in their Chinese stores—something they don’t do currently.
With more than 300 smokers, China remains the world’s largest cigarette market, representing considerable potential for vapor companies. The country’s domestic e-cigarette market has grown at a rate of 70 percent a year since 2013, according to the Global Times, and is valued at about $1.3 billion.
China exports $15.6 billion of vaping products annually, according to the Shanghai Daily.
China’s health authorities have locked down Shenzhen to prevent the spread of Covid-19 from Hong Kong, which is experiencing a surge of the virus.
Shenzhen is a significant manufacturer of consumer electronics, including vapor hardware, for the global market. The city houses tech powerhouses, such as iPhone manufacturer Foxconn, and more than 170,000 vaping-related businesses. The local vapor industry employs more than 3 million people and supplies more than 90 percent of the vapor hardware used around the world, according to some estimates.
The Shenzhen lockdown will last for at least seven days. All nonessential workers must stay home, adults must take PCR tests and public transportation is being halted.
A lockdown in Shenzhen might further disrupt global supply chains because Shenzhen has one of the world’s largest ports. An outbreak in Shenzhen in late spring of last year held up port operations and caused a steep spike in global shipping rates that helped drive up prices for imported goods in the United States and elsewhere.
According to The New York Times, Hong Kong has reported nearly 3,780 Covid-19 deaths and nearly 700,000 new cases since late January. Shenzhen reported 66 new cases in a population of 17 million on Sunday.
RELX has initiated China’s first clinical research on vaping safety. The company is studying the acute effects of traditional cigarettes and electronic cigarettes on the human respiratory system and cardiovascular system. This month, RELX registered its clinical research with the China Clinical Trial Registry, a primary registry in the World Health Organization Registry Network.
In a press release, REXL took the opportunity to highlight its commitment to cross-disciplinary fundamental research into atomization mechanisms, so as to explore the long-term health effects of vaping.
In March 2021, RELX conducted clinical research on the metabolism and kinetics of nicotine. In both clinical studies, RELX used the vaping devices made by its strategic partner Smoore.
Moreover, in September 2021, RELX and Smoore took the lead in drafting two industry standards “General Technical Specifications for Electronic Atomization Devices” and “Safety Technical Specifications for E-liquid”, led by the Electronic Cigarette Industry Committee of China Electronic Chamber of Commerce.
In October 2020, the National Natural Science Foundation of China approved a research program on vaping harm reduction jointly conducted by Smoore and Tongji University. Over the next few years, Smoore and Tongji University will continue to conduct a series of studies on the health effects of vaping.
In January, Smoore launched the world’s thinnest ceramic coil vape pod solution—FEELM Air—in London. Compared with last generation, FEELM Air boasts an overall harm reduction performance improvement of 80 percent.
On Dec. 2, 2021, China’s State Tobacco Monopoly Administration issued the draft rules governing e-cigarettes following the regulator’s release of the exposure draft of national standards of e-cigarettes on Nov. 30, 2021.
As China’s national standards of e-cigarettes come into effective, RELX said it will continue to increase its R&D investment and examine the harm reduction of vaping via scientific substantiation.
Huabao International Holdings, China’s largest e-liquid, tobacco flavoring and fragrance company, fell by more than 65 percent after Chinese regulators announced an investigation into the company’s majority shareholder, Chu Lam Yiu. The investigation is reportedly part of President Xi Jinping’s crackdown on corruption.
Credit: Nikolay N. Antonov
Chu, one of China’s richest self-made woman billionaire, with a net worth valued at $5.5 billion, is being investigated by authorities for “unspecified suspected disciplinary violations,” according to a Hong Kong stock exchange filing. The company said in a statement it was informed of the investigation by its subsidiary Huabao Flavours & Fragrances. “Up to the date of this announcement, the company has not been provided with any details of the nature of the suspected violations of Ms. Chu that is currently being investigated. The business operation of the group remains normal,” the company stated.
It added that the subsidiary received a case filing notice from the Leiyang City Supervisory Committee, indicating that the probe was being carried out by the Chinese Communist party and the local government, according to the Financial Times.
No further details were provided. The company declined to answer further questions, according to the story. Huabao, which Chu launched in her mid-20s in 1996, produces flavors and fragrances used by tobacco manufacturers, including for the e-cigarette or vaping market, as well as food companies. The company’s growth has catapulted Chu to rank among China’s richest people.
Like many high-profile Chinese businesspeople, she has also served on various industry and government advisory committees. The probe into Chu comes as China’s long-running anti-corruption campaign gathers momentum as Xi seeks to secure a historic third term.
Recent amendments to China’s Tobacco Monopoly Law present an opportunity for responsible companies to demonstrate how alternative high-quality products are an important and appropriate element of tobacco harm reduction, according to Broughton.
Writing on the website of the contract research organization, Broughton’s head of regulatory affairs, Lloyd Smart, and regulatory consultant Xiangyin Wei summarize China’s tobacco monopoly law changes and explain what they means for electronic nicotine delivery systems (ENDS).
On Nov. 26, 2021, China’s State Council amended the country’s tobacco law, giving the State Tobacco Monopoly Administration jurisdiction over e-cigarettes. Next-generation products will now be managed in the same way as combustible cigarettes.
Among other things, this means that ENDS companies, including exporters, will need to apply for a license. A single transaction platform will be implemented for product distribution and all products must comply with a new national standard. Regulation of products likely to be introduced following an initial transition period of between three and five months, during which no new products may be brought to market. Products with synthetic nicotine will be banned in China.
According to Broughton, the recently announced changes to e-cigarette regulation in China offer an excellent business opportunity for companies that want to build consumer trust by showcasing their product’s high quality and safety standards.
“As with all regulatory requirements, the most important initial step is to understand fully what’s needed—to provide reassurance or identify gaps that need to be addressed. And to act quickly; seizing the opportunity while making sure you don’t get left behind as the market changes,” write Smart and Xiangyin.
China’s domestic vapor market is facing uncertainty after the state tobacco regulator issues proposed vaping rules.
By Timothy S. Donahue
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 China’s tobacco regulator. The move brings vaping products out of a regulatory uncertainty and under the oversight of the state.
The State Tobacco Monopoly Administration’s (STMA) draft rules follow China’s cabinet amending its tobacco monopoly law to include e-cigarettes in late November. The draft management rules define “e-cigarette” as an electronic delivery product that produces nicotine-containing aerosol for human inhalation. Heat-not-burn products are already regulated as cigarettes and subject to the Tobacco Monopoly Law.
According to the draft rules, to sell legal e-cigarettes in China, a company must meet national standards to register with the STMA so it can conduct business. Companies manufacturing any ancillary products specifically for the vaping industry must also receive a special license from the STMA. Companies must also prove that they have the funding available for production and a facility with the required equipment to produce product that meets the country’s newly proposed standards.
The new rules state that the STMA will establish a “unified national electronic cigarette transaction management platform” that all licensed e-cigarette wholesalers and retailers “must sell products through.” Tax collection and payment of e-cigarettes, meanwhile, “shall be implemented in accordance with national taxation laws and regulations,” the proposed rules states.
The government and the tobacco industry are, essentially, one entity in China, with the STMA regulating the industry and China National Tobacco Corporation (CNTC) manufacturing tobacco products. Under China’s Tobacco Monopoly Law, STMA maintains control over virtually all stages of the production, sales, import, export and distribution of tobacco products in China.
To date, the vapor industry in China has operated in a legal gray area. Regulation had been expected; it was just a matter of time before Beijing would take control of the country’s $1.3 billion e-cigarette industry. The size of the Chinese e-cigarette market has grown from rmb550 million ($86 million) in 2013, witnessing an eight-year compound annual growth rate of 72.5 percent, according to iiMedia Research Group. The World Health Organization estimates that China has over 300 million smokers, and more than half of adult Chinese men are current tobacco smokers. By contrast, the e-cigarette penetration rate among Chinese smokers is less than 1 percent.
The news was welcomed by many leading industry players who say the proposed rules remove any uncertainty and help to weed out bad actors. In a press release, Frankie Chen, Chinese hardware manufacturer Smoore International’s global PR manager, stated that he expects the national mandatory standards to significantly improve product safety and provide global vapers with better products. “Since the standards set higher requirements for vaping manufacturing, it is expected that only the responsible manufacturer with comprehensive safety management can be compliant,” Chen stated.
Domestic outlook
While the entirety of China’s new draft rules for the regulation of vaping products are still vague, the country’s standards section does open a window into the future of China’s domestic vapor market. The transcribed 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 many 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 for products to be exported. 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 what those concentration percentages might include. “There’s no legal imports of nicotine as far as we can tell. There 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 OK,” an industry representative told Vapor Voice and asked not 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 OK.”
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 the STMA. All Chinese e-cigarette manufacturing facilities are subject to the registration and production licensing requirements, even if the products produced are for export only. 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 manufacture 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 there’s an emergency management bureau involved, not just STMA, so 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 allow for a maximum amount of 20 mg of nicotine per 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 survive, they are still confused about what is to be expected when the rules are finalized. Stock shares for RLX Technology, China’s largest domestic brand, fell by more than 16 percent after the STMA released the proposed rules.
RLX chairperson and CEO Ying Wang, however, said the company welcomed the new regulatory framework. “We believe the sector will enter a new era of development—an era marked by enhanced product safety and quality, augmented social responsibilities and improved intellectual property protection,” said Wang at the presentation of the company’s third-quarter 2021 results.
RLX Chief Financial Officer Chao Lu added that the company is well prepared for the new operating environment. “The investments we made in products, talents, research and compliance in the third quarter and beyond will place us in advantageous positions under the new regulatory paradigm,” he said.
In Shenzhen, the capital of global vapor manufacturing, the industry is still 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 [the] State Tobacco Monopoly [Association] 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.”
The U.K. Vaping Industry Association’s (UKVIA) director general has been invited to talk on national TV in China to give his thoughts on recent proposed regulation changes in China and their potential impact on the Chinese vaping industry both domestically and globally.
China recently amended its tobacco laws to include e-cigarettes, meaning they will now be regulated like conventional tobacco products.
The regulation of e-cigarettes in China is of critical importance to the international vaping industry because over 95 percent of e-cigarette hardware is manufactured in that country, leaving the sector keen to see whether this latest regulation change will reshape that global industry.
To look at these questions, John Dunne will be interviewed on the China Global Television Network to offer his perspective based on many years immersed in both U.K. and international regulatory environments for the vaping sector.
Speaking ahead of his interview, Dunne described “reasonable regulation” as a “good thing,” adding, “However, while regulation has the ability to raise standards, ensure products are safe for consumers and restrict minors access, in its current form, it could have a massive detrimental influence both domestically and internationally.”
The UKVIA, together with several other organizations, has outlined its concerns and suggestions to make the regulation more effective and less restrictive in a letter that is being submitted to the State Tobacco Monopoly Administration to consider.
During the interview, Dunne will also get the chance to speak to the Chinese media about the latest vaping developments in the U.K., such as it being potentially the first country in the world to prescribe e-cigarettes.
“We know here in the U.K. that what kills people is the combustion and the tar and not nicotine,” he said in a statement. “Our government sees vaping as the solution to a smoking problem and not the problem itself.”
He added, “I hope the Chinese government and STMA [State Tobacco Monopoly Administration] are open to listening to the industry leaders both domestically and internationally to help shape these regulations so that China can, like the U.K., seize the public heath prize that vaping offers without damaging a very large and vital export business.”
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.
2021 IECIE Shenzhen eCig Expo (Credit: IECIE)
“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.
China has the potential to revolutionize global tobacco harm reduction now that its government has asserted authority over e-cigarettes, according to consumer advocate Martin Cullip.
On Nov. 26, China’s State Council on Nov. 26 amended the country’s tobacco monopoly law to include vapor products, which means that vaping products and their manufacturers will be regulated by the Chinese government under the same process as cigarettes.
The announcement triggered feverish speculation about the impact of the new rules, with some commentators fretting that tobacco rules would put vapor companies out of business and others welcoming the prospect of enhanced product safety and quality.
Writing in Filter, Cullip points not only to the vapor industry’s economic significance to China, but also to the potential domestic health benefits of sensible regulation. China, argues Cullip, has a lot to gain from financially from domestic harm reduction, when the country’s high smoking prevalence in an aging population creates heavy costs in health care and lost productivity.
Cullip is also encouraged by China’s willingness and ability to stand up the World Health Organization, which remains ideologically opposed to tobacco harm reduction.
While the government would seem to have much to gain from blocking the growth of safer alternatives such as e-cigarettes and tobacco-heating products—the state-owned CNTC sells more than 40 percent of the world’s cigarettes—there are many incentives for the government to push things in an entirely different direction, according to Cullip.
China manufactures the vast majority of the world’s vape products. More than 170,000 businesses engage in e-cigarette production and the supply chain, employing around 3 million people. The CNTC is also the world’s biggest holder of tobacco harm reduction patents, owning almost 27 percent of all related patent publications.
“It is difficult to imagine the government strangling the market—even if this is motivated more by profit than by its citizens’ health,” writes Cullip.
