{"id":1514,"date":"2020-05-19T23:50:08","date_gmt":"2020-05-19T23:50:08","guid":{"rendered":"https:\/\/blogs.bmj.com\/tc\/?p=1514"},"modified":"2020-05-19T23:50:08","modified_gmt":"2020-05-19T23:50:08","slug":"chinas-e-cigarette-manufacturers-facing-uncertain-future","status":"publish","type":"post","link":"https:\/\/blogs.bmj.com\/tc\/2020\/05\/19\/chinas-e-cigarette-manufacturers-facing-uncertain-future\/","title":{"rendered":"China\u2019s e-cigarette manufacturers facing uncertain future"},"content":{"rendered":"

 <\/p>\n

Ross MacKenzie, Jennifer Fang and Julia Smith<\/strong><\/p>\n

China\u2019s electronic cigarette (e-cigarette) industry accounts for close to 90% of global production. Based in Shenzhen in Guangdong province<\/a>, an estimated 3,900 manufacturers employed some 2 million people in 2018 and reported sales of 33.7bn yuan (US$ 4.8bn) and exports worth 28.7bn yuan (US$ 4bn). Figures for the first three financial quarters of 2019<\/a> showed a 175% increase in domestic sales, and put export sales at US$6.2bn. Initially export-driven, the industry has recently made inroads into the domestic market and there are now some 10 million users in China<\/a>, mostly aged between 15 and 24 years.<\/p>\n

Importantly, the e-cigarette sector has operated with little regulatory oversight<\/a>, and remains independent of the state monopoly China National Tobacco Corporation (CNTC), which oversees all aspects of the tobacco business in the country<\/a>.<\/p>\n

An ability to attract capital investment has been a key factor in recent expansion industry expansion. In 2018, private manufacturers received hundreds of millions of dollars<\/a> in venture capital funding from leading Chinese investment institutions. Industry leaders RELX <\/em>Technology<\/em> and Shenzhen IJOY Technology Co. Ltd<\/em> have been particularly successful in securing financing<\/a>, but dozens of Chinese start-ups that produced Juul-like vaping pods also attracted capital in 2018. Many of these companies emerged from the country\u2019s technology sector such as Laan<\/em> vaping products which was founded by former WeChat<\/em> employees<\/a>.<\/p>\n

Since mid-2019 however, e-cigarette manufacturers have been dealing with a series of challenges. Vaping-related illness and deaths<\/a>, and recent regulation<\/a> prohibiting flavoured cartridge-based e-cigarettes in the United States, the Chinese industry\u2019s largest market, have had a predictable impact on exports. Domestically, the Chinese government announcement of a ban on online e-cigarette advertising and sales in November 2019 had an enormous impact, particularly for smaller firms. Signs that official attitudes had been changing prior to the announcement included China Central Television reports on the potential health risks of vaping and the lack of industry regulation in March 2019<\/a>, and the ban on Juul\u2019s <\/em>online sales<\/a> a few days after their launch in the Chinese market in September.<\/p>\n

Finally, e-cigarette manufacturers have been severely affected by the COVID-19 pandemic that shut down much of China\u2019s industrial sector, and led to the investment industry reassessing its strategies<\/a> regarding start-up companies. Concerns as to whether vaping exacerbates the impacts of Covid-19<\/a> poses another potential impact on the market.<\/p>\n

The outcome of the current situation is likely to be that the Chinese e-cigarette industry will be dominated by a limited number of major companies, as many smaller manufacturers are unable to survive, leading to greater efficiency. Market leader Relx Technology<\/em><\/a>, for instance, reportedly has sufficient capital to withstand current challenges and its factory was expected to be back at full production capacity by the end of March 2020. The company has also announced plans<\/a> to add 10,000 new retail outlets to its existing network of 1,400 stores, in response to the online sales ban.<\/p>\n

Finally, observers have suggested that the CNTC is assessing<\/a> whether to enter the market. The monopoly\u2019s existing 5 million domestic retail outlets<\/a> and the recent emergence of China Tobacco International Hong Kong<\/a> as the CNTC\u2019s overseas arm, may present the greatest challenge to China\u2019s private manufacturers and have implications for the global vaping industry.<\/p>\n

The authors are researchers with the Global Tobacco Control Research Programme, Faculty of Health Sciences, Simon Fraser University, Canada. Jennifer Fang and Julia Smith are\u00a0supported by the SSHRC grant 430-2018-00736.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

  Ross MacKenzie, Jennifer Fang and Julia Smith China\u2019s electronic cigarette (e-cigarette) industry accounts for close to 90% of global production. Based in Shenzhen in Guangdong province, an estimated 3,900 manufacturers employed some 2 million people in 2018 and reported sales of 33.7bn yuan (US$ 4.8bn) and exports worth 28.7bn yuan (US$ 4bn). Figures for […]<\/p>\n

Read More…<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6842,6857,2149,6850,2138,1715,2143],"tags":[6860],"class_list":["post-1514","post","type-post","status-publish","format-standard","hentry","category-china","category-coronavirus","category-e-cigarettes","category-economics","category-legislation-and-policy","category-marketingadvertising","category-tobacco-industry","tag-covid19"],"yoast_head":"\nChina\u2019s e-cigarette manufacturers facing uncertain future - Blog - Tobacco Control<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/blogs.bmj.com\/tc\/2020\/05\/19\/chinas-e-cigarette-manufacturers-facing-uncertain-future\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"China\u2019s e-cigarette manufacturers facing uncertain future - Blog - Tobacco Control\" \/>\n<meta property=\"og:description\" content=\"  Ross MacKenzie, Jennifer Fang and Julia Smith China\u2019s electronic cigarette (e-cigarette) industry accounts for close to 90% of global production. 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