Caixin
Nov 02, 2019 05:47 PM

Chinese Government Effectively Bans Online Sales of E-Cigarettes

A group of people use e-cigarettes at a gathering in Hefei, Anhui province, Sept. 28, 2017. Photo: VCG
A group of people use e-cigarettes at a gathering in Hefei, Anhui province, Sept. 28, 2017. Photo: VCG

The Chinese government on Friday effectively banned online sales of e-cigarettes as it seeks to prevent the addictive and potentially harmful products from falling into the hands of minors.

The notice published jointly by the State Administration for Market Regulation and the state tobacco monopoly also prohibits e-cigarette companies from advertising their products online.

“As supplements to traditional rolled cigarettes, e-cigarettes naturally harbor significant safety and health risks,” the notice says, adding that an anything-goes approach across the historically unregulated sector has helped spawn products that leak tar, have faulty batteries, or contain other unsafe ingredients.

The move comes after the same two departments issued a notice in August banning the sale of e-cigarettes to anyone under the age of 18. While that directive has been partly successful, officials found that some minors were still able to buy e-cigarettes online, the new notice said. It went on to condemn e-cigarette sellers for targeting young people “in the blind pursuit of profit” despite the threat to their health.

China’s e-cigarette sector generated $718 million in revenues in 2018, up from $451 million in 2016, according to Bloomberg, citing data from U.S.-headquartered research firm L.E.K. Consulting. According to an August report by Tsinghua University’s Public Health and Technology Supervision Research Group, an estimated 7.4 million people in the country use e-cigarettes. The practice, known as vaping, is particularly common among people aged between 15 and 24, according to a May report by the Chinese Center for Disease Control and Prevention.

Despite their popularity, e-cigarettes are coming under increasing scrutiny both in China and elsewhere as experts and officials warn of their potential health risks. Although e-cigarettes don’t burn tobacco, they do harbor addictive and potentially harmful substances like nicotine, flavor additives, and ultrafine particles that can be inhaled deep into the lungs. In the United States, 37 people have died this year from lung illnesses associated with e-cigarette use, according to the U.S. Centers for Disease Control and Prevention.

In China, e-cigarette vendors commonly sell their products through popular e-commerce platforms like Alibaba-owned Taobao and its rival JD.com. Sellers have previously come under fire for failing to check the ages of their buyers despite the ban on e-cigarette sales to minors.

Responding to Friday’s announcement, a spokesperson for RELX Technology, China’s leading e-cigarette brand, told Caixin that the company would pull its products from online shopping sites and also ensure vendors verify the identities of suspected underage buyers offline. The company’s e-cigarettes were still available for purchase on Chinese e-commerce sites as of Saturday afternoon.

E-cigarette companies have been preparing for a government clampdown for some time, Guo Xiaoyu, an investor in a popular crowdsourcing-based e-cigarette testing platform, told Caixin. While the ban may force a large number of sellers out of the industry, it may also spark sector-wide consolidation and increased investment in the biggest e-cigarette companies, she added.

In addition, the new rules may pave the way to stronger government taxes on consumer products containing nicotine, an industry insider told Caixin. Last month, the main tax-writing committee of the U.S. House of Representatives slapped a new levy on the nicotine used in liquid vaping products, following a wave of e-cigarette prohibitions imposed by cities and states.

Ultimately, the success of China’s new regulations will come down to the strength with which they are enforced, an investor with knowledge of the sector told Caixin. “Will e-cigarette brands be banned from WeChat public accounts, Weibo microblogs, and small online programs? All of these still lack detailed rules,” the investor said.

Contact reporter Matthew Walsh (matthewwalsh@caixin.com)

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