China Places ENDS Under Monopoly

China’s State Council on Nov. 26 amended the country’s tobacco monopoly law to include vapor products, reports The Global Times. According to the amendment, new types of tobacco products, such as e-cigarettes, will be managed like combustible cigarettes.

Among other things, this means that manufacturers of new tobacco products will be required to reveal ingredients, warn consumers about the health risks presented by their products and pay higher tax rates. They will also be banned from opening stores near schools, analysts said.

To date, the vapor business in China has operated in a legal grey area.

China’s vapor business was valued at CNY8.38 billion ($1.31 billion) in 2020, according to the data from iimedia. China’s e-cigarette market experienced a compound annual growth rate of 72.5 percent between 2013 and 2020, the report said.

China is also the world’s leading manufacturer of vapor product hardware. In 2021, China’s e-cigarette exports will hit CNY100 billion, according to China’s Electronic Cigarette Industry Committee (ECIC).

While government regulation may hurt some e-cigarette businesses in the short term, some expect greater regulatory clarity to benefit the industry in the long run.

The State Council statement may speed up the introduction of a detailed e-cigarette national standard to raise the industry entry thresholds, which benefits leading companies with compliance advantages, TF Securities told Shine.

And it may bring more tax income in China, TF Securities said.

The growing e-cigarette market will usher in a healthy development under standardized supervision, said Shi Fanke, an analyst of Zheshang Securities.

Vapor market leader RELX said that it “firmly supports” amendment of the law and will actively implement regulation requirements later, according to media reports.

China’s tobacco industry is controlled entirely by a government monopoly, and strict controls determine which companies and retailers can produce and sell cigarettes.

The government outlawed the sale of e-cigarettes to minors in 2018 and banned online sales the following year, while Chinese state media have warned of the health and safety risks of using the products.