Business

China market shut to international e-cigarette companies

International electronic cigarette companies encounter barriers to entry in China, where their products are made.

Vaping, the smoking of electronic cigarettes, is still uncommon in China, even though the country is the biggest consumer of cigarettes and manufactures 95 per cent of the world's electronic cigarettes.

E-cigarettes are gaining popularity globally. The world spent US$2 billion (about $16 billion) on e-cigarette products in 2011, according to London-based market researcher Euromonitor International. Bloomberg Industries analysts expect global e-cigarette sales to soar to US$2.3 trillion (about $18 trillion) by 2050.

Nevertheless, they only account for a tiny part of China's 1.2 trillion yuan (about $1.4 trillion) cigarette business.

Beijing announced last month it would ban smoking in public areas by the end of this year, opening up an opportunity for e-cigarettes to share the world's biggest tobacco market.

The Vapor Group, a Florida-based e-cigarette company whose products sell in the United States, Europe and South America, has made several attempts to open the door to China market, but been barred by the authorities.

"A large source of revenue for the government comes from taxes on the conventional cigarettes. That is why they do not allow electronic cigarette companies to sell their products in China," Mr Yaniv Nahon, the company founder, said.

In fact, all the e-cigarettes of The Vapor Group are manufactured in China's southern metropolis of Shenzhen, and then shipped to all over the world.  Mr Nahon expects the net profit of Vapor's e-cigarettes to reach US$35 million (about $273 million) by the next year.

Mr Nahon is optimistic about the future of e-cigarettes. "Everybody smokes and everybody wishes to quit smoking. And that (vaping) is the easiest way to quit smoking," he explained.

Vaping is viewed by many as a healthier alternative to smoking, as e-cigarettes do not burn the tobacco, and thus produce less of the major carcinogens present in conventional cigarettes. But some also say there is not enough long-term research to determine exactly how safe and healthy e-cigarettes are.

In view of the surging popularity of e-cigarettes in the U.S., Mr Nahon believes the federal government will soon start to tax on the products. E-cigarettes in some states, including Minnesota, are already subject to tobacco tax.

The U.S. Congress, the U.S. Food and Drug Administration and the European Union have been jointly examining ways to regulate the use of e-cigarettes and ban the advertising of them.

Vaping is viewed by many as a healthier alternative to smoking.
Vaping is viewed by many as a healthier alternative to smoking.

The Chinese authorizes would also make laws to regulate e-cigarettes, predicted Prof Zhao Yun, director of the Centre of Chinese Law at The University of Hong Kong. "Perhaps in the future, a judicial interpretation will be released by the Supreme People's Court," he added.

The Mist Shisha Sticks, a Hong Kong-based company who produces sticks for vaporizing flavored tobacco called shisha, has sold around 15,000 to 18,000 electronic shisha sticks internationally. The company launched its manufacturing facilities in mainland China and has just entered into its second year of operation.

Mr Nav Lalji, director of the Mist Shisha Sticks, expressed his concerns over lucrative patent infringement of the company's Chinese counterparts. "If we are to sell our mist there, I'm sure within the span of two to three months, you will see copies of our products pop up one after another," he said.

"Plus, I'm not too sure if the Chinese is ready for the product because they are very old-school in terms of tobacco consumption," Mr Lalji told The Young Reporter.

 

Reported by Joyce Wong

Edited by Lavinia Mo

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