China Releases Major Draft Standards for Vaping Industry, Market Concentration Likely

Agroup of Chinese government bodies on Tuesday afternoon released comprehensive draft standards for vaping and e-cigarettes, sending shockwaves through a domestic industry which includes leading global firms such as SMOORE and RELX.

In a 26-page document, national authorities made the case for more stringent measures aimed at shoring up product quality and ensuring firms fulfill certain health requirements. According to the World Health Organization, China is home to over 300 million smokers, representing nearly one-third of the global total.

The government bodies behind the draft legislation, expected to come into effect by May 2022, include state-owned tobacco company and market overseer China Tobacco, the State Administration for Market Regulation and its subsidiary Standardization Administration of China.

By some estimates, China’s southern city of Shenzhen holds a 90% market share in the global vaping industry, meaning the potential impact of imposing comprehensive national standards in the country is profound.

“I think in terms of industry landscape it will benefit the large companies,” said a representative for SMOORE in comments to Pandaily on Wednesday. While major firms in the industry already maintain certain in-house safety requirements, said the source, “small companies and factories are not able to comply with the national standards.”

The manufacturing boomtown of Shenzhen has garnered a global reputation over the past few decades for its scrappy entrepreneurs and can-do business attitude. More recently, however, tightening production standards have led to greater market concentration across several industries.

Vaping appears to be no exception. “Now I think the industry is totally changed in Shenzhen, because those vaping manufacturers are transformed from cost-oriented to technology-oriented,” said the SMOORE representative.

Atomization, the core technology underpinning vaping products, also has a wide range of potential applications in fields such as healthcare, beauty products and home appliances, suggesting market leaders have room to grow.

The developments come just days after Chinese regulators amended national tobacco monopoly law to include e-cigarettes, effective immediately.

In a statement to Pandaily, the SMOORE representative affirmed: “This amendment brings e-cigarettes under tobacco monopoly law, eliminating the uncertainties about the future of Chinese vaping industry, showcasing that vaping is now legally recognized and included into the state’s tobacco regulations.”

Shenzhen-based SMOORE is the world’s most valuable company in the vaping industry, with a current market capitalization of around $34 billion. The firm specializes in the manufacturing and R&D of vaping devices and components, accounting for 18.9% of the global market.

Another key player in the domestic market is Beijing-based RELX, founded in 2018 and listed on the New York Stock Exchange in January 2021, with a current market capitalization of $5.5 billion.

Source: Pandaily

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