Tighter Vape Regulation Looms as China Tobacco-Linked Firms Emerge

On March 22, the Ministry of Industry and Information Technology publicly solicited opinions on the revision of the "Implementation Regulations of the Tobacco Monopoly Law of the People's Republic of China," proposing to add a clause in the appendix as Article 65: "New tobacco products such as electronic cigarettes shall be implemented in accordance with the relevant provisions regarding cigarettes in this regulation."

This means that electronic cigarettes and other new tobacco products are likely to be formally included under specialized legal regulation for the first time, and in the future, they may follow the same regulatory policies as traditional cigarettes, leading to a shake-up and reshuffling of the entire electronic cigarette industry.

In the future, electronic cigarettes may be incorporated into the tobacco monopoly system, managing them from three dimensions: raw materials, production, and sales channels, thus completely ending the previous era of low barriers and disorderly operations.

As a result, the draft for soliciting opinions has thrown the electronic cigarette industry into turmoil and confusion. However, industry insiders generally believe that in the long run, standardized regulation and clear standards will be extremely beneficial for the comprehensive and healthy development of the electronic cigarette industry.

Recently, several electronic cigarette industry chain companies with shares from China Tobacco Corporation have attracted industry attention. According to corporate investigation data, an investment fund under China Tobacco has invested in the domestic e-liquid company Hengxin Group as of January this year, with Kunming Shuangwei Technology Co., Ltd., a shareholder of Hengxin Operating Company, holding 4.997% of the shares. After penetrating the equity, it was discovered that Shuangwei Technology has ties to China Tobacco Corporation.
 
According to corporate investigation data, the well-known electronic cigarette manufacturer Zhuoli Neng has a shareholder structure that includes Xiangwei Smoke Chain (Beijing) Technology Co., Ltd., which, after equity penetration, reveals that Xiangwei Smoke Chain has shares from China Tobacco Corporation and Zhejiang Tobacco.
 
Against the backdrop of impending strict regulations on electronic cigarettes, the shareholder backgrounds of these two companies have sparked industry attention and discussion.

Coincidentally, while I was researching the layout of China Tobacco Corporation in the industry chain, I learned that another newly created electronic cigarette brand, COEE, which is backed by a subsidiary of China Tobacco Group, has recently begun to intensively engage in channel negotiations for cooperation and is set to launch electronic cigarette products in April.
 
Currently, the information disclosed online is quite limited. Through corporate investigation, I learned that on January 4, 2021, the parent company of the COEE brand, Shenzhen Xingguang Diandian Technology Co., Ltd., was established in Shenzhen, with Zhejiang Yiwei Smoke Chain Technology Co., Ltd. as one of the founding shareholders, holding a 20% stake.
 
Tracing the equity of Zhejiang Yiwei Smoke Chain upwards leads to Zhejiang Xiangyi Rongmei Technology Co., Ltd., which is further controlled by Zhongwei Capital, which is held by China Shuangwei Investment and Zhejiang Tobacco Company, with China Shuangwei Investment being a 100% controlled investment enterprise of China Tobacco Corporation. Thus, another electronic cigarette brand backed by China Tobacco Corporation is about to emerge.
 
The three companies backed by China Tobacco include Hengxin, a manufacturer of e-liquid, Zhuoli Neng, an electronic cigarette manufacturer, and COEE, an electronic cigarette brand. This indicates that China Tobacco has already laid out its strategy across the entire electronic cigarette industry chain.