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China’s new regulations that tighten controls on vapes from manufacturing to exporting will help accelerate the development of standards and quality as well as provide a template for global regulations.
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China’s e-cigarette industry continuously developed and introduced innovative e-cigarette products over the past two decades.
Speaking at InterTabac this September, Jason Tian of Shenzhen 2FIRSTS Technology and the Electronic Cigarette Professional Committee of the China Electronics Chamber of Commerce (ECCC), provided an overview of China’s e-cigarette environment and the path going forward after new regulations came into effect.
This year marks the 20th anniversary of e-cigarettes, two decades of continuous research and development since the first e-cigarette was patented by Han Li. In 2003, Han Li founded Ruyan Technology in China and Ruyan e-cigarettes started to be sold domestically in small quantities. A year later, Yao Jide founded Changning Dekang and started to develop and produce e-liquids, followed by some other manufacturers. At that time the e-cigarettes and e-liquids were only sold in the domestic market.
Export-oriented e-cigarette manufactures were founded in Bao’an, Shenzhen in 2006, such as RILF, the predecessor of renowned industry players First Union, Smoore, and Kanger. Using Turkey as the transit point to the European market, these manufacturers brought China’s e-cigarettes to the world.
A growing number of manufacturers were established in the following years between 2007-2011, as well as innovative versions of e-cigarettes from cigarette-shaped devices to the introduction of the standard atomizer interface, and pods with improved performance.
In 2013, Imperial Brands acquired the Ruyan brand and all its intellectual property rights. Hangsen also became the first Chinese e-cigarette company to set-up production facilities overseas with its factory in Poland.
Notably, in 2014 the industry’s efforts to band together resulted in the establishment of the Shenzhen Electronic Cigarette Association (SECA) in August and the Shenzhen Electronic Cigarette Industry Association (SECIA) in October. The industry grew in leaps and bounds, and China became the world’s largest producer and exporter of e-cigarettes. The following year saw the invention of innovations such as nicotine salt e-liquids and advanced closed-systems devices, as well as the first IECIE exhibition.
The need for clear standards for e-cigarettes and e-liquids was long recognized by the industry by then, and in 2016 the E-Cigarette/Atomizing Liquid Products General Technical Requirement, drafted by Hangsen and Feellife, was published under the supervision of deputy director Lu Jian of Bao’an District Inspection and Quarantine Bureau.
In 2017, SECA and SECIA merged under the China Electronics Chamber of Commerce as the Electronic Cigarette Professional Committee (ECCC). This group would go on to promote the legalization and standardization of the industry, and in December that year released two sets of standards - the General Specifications for Electronic Cigarette Devices and Specifications for Electronic Cigarette Liquids.
The following year saw the establishment of RELX, leading to explosive growth for the domestic e-cigarette market. Overseas, Altria Group acquired a 35% stake in Juul Labs.
E-cigarettes were firmly in the crosshairs of US regulators in 2019, with the devices initially being blamed for EVALI lung illnesses. It was later proven that the cause of the illnesses was not e-cigarettes but rather vitamin E acetate that was illegally added to THC e-liquids, but the absolution of e-cigarettes was much less announced by officials or mainstream media. The US Food and Drug Administration (FDA) also finally announced the premarket tobacco product application process for e-cigarette and e-liquids to be legally sold in the US market. That same year, Chinese regulators announced that online sales of e-cigarette products were banned in China, leading to major e-commerce platforms having to remove the products from their platforms but also causing offline stores to grow rapidly. Smoore was listed on the Hong Kong Stock Exchange in 2020, followed by RELX listing on the New York Stock Exchange in 2021. Last year also saw FDA grant its first approval for an e-cigarette, Vuse Solo.
The present
China is home to 90% of the world’s e-cigarette production, largely in Shenzhen or “Vapor Valley”.
2FIRSTS forecasts that the global e-cigarette mar-ket will reach US$108 billion this year, with China’s e-cigarette exports forecast to reach RMN187 billion (US$26 billion). Q1/2022 figures show that 65% of China’s exports were disposable devices, 17% open-systems, 8% pod systems, and 10% other products such as e-liquids and herbal or CBD products.
The main export markets for China’s e-cigarette industry in 2022 are the US (58%, US$10.54 billion), Europe (24%, US$4.89 billion), Russia (8%, US$9.7 bil-lion), Southeast Asia (5%, US$6.9 billion), and the Middle East (4%, US$5.5 billion).
Known for its innovative r&d efforts, China’s e-cigarette industry saw 1,771 e-cigarette patent applica-tions in Q1/2022, with the expected total for the whole year forecast at 7,084 applications. In 2020 and 2021 the number of e-cigarette patent applications reached 5,738 and 5,818, respectively.
The future
This year, the State Tobacco Monopoly Administration (STMA) issued the Administrative Measures for Electronic Cigarettes and the State Administration for Market Regulation (National Standardization Administration) issued national standards for electronic cigarettes. The standards include requirements that e-cigarettes must include nicotine; tobacco-based heat-not-burn devices are not classified as e-cigarettes but rather as cigarettes; e-cigarettes must be a closed system that does not allow the user to fill their own liquid; flavors other than to-bacco are not allowed; synthetic nicotine is not allowed, only nicotine extracted from tobacco leaves is allowed; nicotine levels cannot exceed 20mg/g, the total amount of nicotine does not exceed 200mg, and the amount of nicotine released per puff does not exceed 0.2mg; and only a list of 101 additives are allowed.
Under the new standards, nicotine suppliers must obtain a production license and are subject to quota re-strictions, as are suppliers of e-liquids and accessories. However, suppliers of batteries and packaging are not included in the e-cigarette regulatory system. Domestic sales distributors must have a tobacco wholesale license and go through a pre-market review of product requirements. Export distributors need to go through export product filing, with priority given to products that are compliant with the standards in the destination countries. Domestic retailers must hold a tobacco retail license that includes e-cigarettes and are not allowed to hold brand exclusive sales. China currently has around 50,000 e-cigarette retailers and 5.5 million tobacco retailers.
Rather than hindering the progress of China’s e-cigarette industry, e-cigarette regulatory policies will not only help accelerate the development of standards and quality for the industry through the licensing system, but will also provide a template for global regulations, accelerating the introduction of similar e-cigarette policies around the world. With the strict regulation of China’s domestic market, an increasing number of Chinese e-cigarette brands will accelerate their global development, which will advance the global e-cigarette penetration rate as well as bring about increased market competition. And, with a mature regulatory environment, companies can more bravely increase their investment in r&d. Under the new e-cigarette regulatory policies, the tobacco taste, environmental protection, protection of minors, as well as some other areas, will become the focus of r&d. 2FIRSTS expects a new round of technological changes will come in the next 1-2 years.
For foreign companies looking to work with the Chinese e-cigarette industry, 2FIRSTS encourages them to make sure their Chinese supplier has a tobacco monopoly production license; make sure their Chinese sup-plier has sufficient production quotas to support their growing demand; and to make sure that the product has a registered trademark and that it meets the requirements of the product standards of the country where it is to be sold. 2FIRSTS has a licensed manufacturer database which can be found at https://www.2firsts.com/license.