UK Media: Tighter Smoking Bans Boost E-Cigarette Makers’ Confidence in the China Market

According to news from the Chinese e-cigarette industry: After his wife became pregnant, 30-year-old Shanghai businessman Qu Liang changed his previous "smoking" lifestyle and switched to e-cigarettes. Although China is the world's leading producer of e-cigarettes, the number of people who smoke e-cigarettes is still relatively low.

About 10 years ago, a Chinese doctor invented the e-cigarette, and now most e-cigarettes worldwide come from China. E-cigarette sales are rapidly increasing globally, but they account for only a small portion of China's 12 trillion RMB (approximately 200 billion USD) cigarette market.

People are increasingly aware of the health risks of smoking, and the government's firm measures to ban smoking in public places have created opportunities for e-cigarettes to enter China, the world's largest cigarette market.

"With more and more places banning smoking, I find myself using e-cigarettes more often," Qu said. Six years ago, he chose e-cigarettes for health reasons, initially just buying them for himself. This year, he shifted his e-cigarette business from exports to the domestic market.

E-cigarettes in China are sold primarily online, with relatively relaxed government regulations. Currently, countries like Singapore and Brazil have banned the sale of e-cigarettes.

An e-cigarette is a battery-powered device that vaporizes a nicotine solution, without the harmful tar and particulate matter produced by traditional cigarettes, making it a healthier alternative. However, there is still no long-term scientific evidence proving the safety and efficacy of e-cigarettes, leading to warnings from critics like the British Medical Association about their potential dangers.

Despite e-cigarettes' small share of the global cigarette market, their growth is rapid. Recently, Hollywood stars Leonardo DiCaprio and Julia Louis-Dreyfus were spotted vaping e-cigarettes at the Golden Globe Awards.

Analysts predict that within 10 years, e-cigarette sales will surpass those of traditional cigarettes, influenced by public health awareness and government regulations, leading to a decline in traditional cigarette sales, while big tobacco companies will seize the opportunity presented by e-cigarettes.

China's e-cigarette market is a big cake.

For Chinese e-cigarette manufacturers, while overseas market demand is growing, the potential of the domestic market is also enticing.

Even though e-cigarette users only make up a small portion of the 300 million smokers, they can still bring attractive profits. In 2012, China's cigarette consumption was 24.6 trillion RMB—about 4.8 RMB per person per day—accounting for one-third of global cigarette consumption.

Li Baosheng, general manager of Shenzhen Smoore Technology, believes: "Strict regulations on cigarettes are good news for e-cigarettes." Previously, the lax policies on cigarettes slowed the development of the e-cigarette industry.

In February, the Chinese government intensified its regulation of cigarettes, banning smoking in public places and raising cigarette prices by 5%. The Ministry of Health stated that a nationwide smoking ban in public places will be implemented this year.

Analysts believe that China will eventually lift the ban on e-cigarette sales.

Shane MacGuill, a tobacco analyst at Euromonitor, believes: "Eventually, no one will smoke traditional cigarettes; this is an inevitable trend."

"China will not become an island of traditional smokers; it will inevitably seek alternatives. I can't determine how long this process will take, but it will definitely happen."

Electronic cigarette materials from British American Tobacco, Philip Morris International, and independent American companies come from China, but e-cigarettes can provide companies with an opportunity to enter the Chinese market, which is currently monopolized and controlled by the state.

According to a survey by Euromonitor, in 2012, the share of imported cigarettes in China was less than 1% of the total market. A report from the Brookings Institution shows that the China National Tobacco Corporation monopolizes 98% of the domestic cigarette market share. Western brand e-cigarettes are expected to break into the Chinese market through e-cigarettes.

Most large state-owned tobacco companies in China do not produce e-cigarettes, with only one company having conducted research on e-cigarettes. Global tobacco companies are developing wealthier and health-conscious smoking groups in major cities.

Currently, the official regulatory policies on e-cigarettes are unclear, and there are still many obstacles, especially the risk of losing significant tax revenue from traditional cigarettes. In the future, the government may decide to implement the same strict regulatory policies on e-cigarettes as on traditional cigarettes, leaving little room for international players.

Eddy Hargreaves, a tobacco analyst at Canadian market research firm Cannacord Genuity, believes: "Nevertheless, I think this will inevitably become a potential channel for (overseas brands) to enter the Chinese market."

"The potential of the Chinese market is too great; we hope e-cigarettes can become popular in China, as growth in the European and American markets is too slow."