China bolsters e-cigarette regulations to smoke out non-compliance

China has unveiled plans to tighten controls over e-cigarette production and investment to address concerns over fierce intra-industry competition and excess capacity, the latest step in the country’s broader effort to enhance its regulatory power over tobacco, a sector which enjoys a functional monopoly.

The draft policy, released by the national tobacco regulator on Thursday, follows a State Council opinion issued earlier this month which placed e-cigarettes and nicotine pouches under stiffer oversight.

As the e-cigarette industry grapples with challenges – including the slow exit of outdated capacity, structural imbalances and poor compliance with export rules – the new regulation specifically names “involution-style” competition as an area of concern.

“Involution”, a term describing the self-defeating competition that has driven down prices and shrunk profit margins within several industries, will be limited in the tobacco sector through curbs on investment and production expansion, according to the draft document.

“No investment in new projects shall be permitted, and relocated or reconstructed facilities shall not result in any increase in production capacity.”

In principle, the measure also forbids the widening of capacity through on-site technical renovations.

Stronger oversight of production capacity was also laid out as a priority in the draft policy. Companies would be mandated to operate strictly within their approved limits, with any proposed adjustments requiring additional approval and updated licensing.

South China Morning Post