Yang Haibo of Shenzhen Bao'an Development Research Center: new regulations protect leading vape comp

On December 27, the "Changing Situations, New Opportunities, Trends" 2021 China (Shenzhen) Vaping Technology Industry Development Summit Forum was held in Shenzhen. The forum was hosted by the Southern Metropolis Daily and organized by Shenzhen Dajianshi Media.

The latest data released at the forum shows that China's vaping technology products account for 95% of global production capacity, exported to over 200 countries and regions worldwide; meanwhile, Chinese electronic vaping patents account for 90% of global related patents. Shenzhen gathers over 90% of the world's e-cigarette production capacity.

At the meeting, Yao Jide, chairman of the Electronic Cigarette Industry Committee of the China Electronic Commerce Association, stated that the development of China's electronic cigarette industry has gone through a process from weak to strong, from "barbaric growth" to standardized development over the past 20 years, forming a production and manufacturing supply chain system with core leadership, leading global research and innovation, and intellectual property. China's electronic cigarette manufacturing industry has an absolute influence and voice in the global market economy growth.

It was introduced that the Southern Metropolis Daily will release the "China (Shenzhen) Vaping Technology Industry Development White Paper" next year, focusing on the iteration of vaping technology and the evolution of the industry, the standardized development of enterprises and technological innovation, as well as the opportunities and challenges faced by the vaping technology industry.
In the future, vaping devices can be applied in biomedical and health fields.

"The main component of product strength is research and innovation capability," said Zeng Huabin, deputy general manager of Shenzhen Leiyan Technology Co., Ltd. (hereinafter referred to as "Leiyan Technology"). Looking back at the two significant transformations in electronic cigarettes, it can be seen that vaping electronic cigarettes are a high-tech industry driven by technology.

Currently, research in the field of vaping technology still needs to be deepened, and companies need to continue exploring more application scenarios for high-quality vaping technology products.

Liu Tuanfang, chairman of Shenzhen Yijiate Technology Co., Ltd., mentioned in her keynote speech: "Currently, the most successful application field of vaping devices is nicotine delivery and herbal delivery.

As one of the drafters of the electronic cigarette group standard, she introduced the working principles and quality standards of vaping devices from seven dimensions, including component reduction, ease of consumer use and absorption, appropriate aerosol capsule size, liquid not entering the mouth, no leakage, stable storage, and compliance with medical standards.

In the area of vaping materials, which is of great concern during the design phase of vaporizers, Liu Tuanfang mentioned that heating wires are a common heating method, and there are also ultrasonic, infrared, high-frequency, and even higher-tech heating systems to come in the future.

She also discussed that currently, there is relatively little research on the changes in the human body from the respiratory system perspective globally, and in the future, vaping devices can be applied in biomedical and health fields, which has vast potential.

Zeng Huabin stated that the company builds core material production and assembly capabilities through the production and research of basic vaping materials and the exploration of basic vaping science, to form the ability to define products, further ensuring compliance, safety, and experience through technology.

Leiyan Technology owns the e-cigarette brand Mo Di, which has a 10-year history of going overseas. Regarding the export of vaping electronic cigarettes, Zeng Huabin mentioned that products need to adapt to local markets, and since the product life cycle is relatively short, companies face the challenge of continuous technological iteration.
Building "trust" for e-cigarette brands globally.

In addition to exploring application scenarios for vaping technology products, going overseas is also a common development direction for e-cigarette companies. This year, China's electronic cigarette industry has an annual export value of approximately 138.3 billion yuan, a year-on-year increase of 180%.

Han Yixin, head of the international strategy department of RELX, believes that "trust" is the key word for going overseas. The process of brands going abroad is from awareness, familiarity, liking to trust, gradually climbing the ladder. Compared with brands from developed countries like the US, Germany, Japan, and the UK, Chinese brands still have a significant gap.

Han Yixin stated that RELX International breaks down "trust" into four dimensions: employee trust, partner trust, consumer trust, and public and regulatory trust. Regarding consumer trust, she believes the core point is that companies must provide consumers with products of the highest quality and safety standards, while respecting local customs and exploring local consumer preferences.

In building public and regulatory trust, Han Yixin showcased three practices of RELX International: first, comply with laws and regulations, adhering to different standards and access requirements in different regions; second, adhere to operational bottom lines, protect minors, and combat counterfeit goods through various local cooperation methods to promote healthy industry development; third, actively give back to society.

At the forum, Yang Haibo, a senior economist at the Shenzhen Bao'an Development Research Center, stated that first, it should comply with local legal requirements, and secondly, pay attention to political risks, legal risks, market risks, cultural risks, and consumer religious beliefs. He stated that the future manufacturing industry will have three transformations: branding, high-end, and service-oriented manufacturing.

Experts: Policies have raised market access thresholds.

Recently, there have been significant changes in regulation in the vaping electronic cigarette field, with the formal release of the "Electronic Cigarette Management Measures (Draft for Comments)" not long ago. During the roundtable session of the forum, industry, academia, research, investment, and media discussed the changes, opportunities, and challenges brought by policies.

The organizer provided the image.

"Companies are not afraid of regulation; they fear small, chaotic, and poor companies that disrupt market order, while policies have raised market access thresholds, which is good for regulating existing stock," Yang Haibo believes that the implementation of policies serves as a "stabilizing pill" for leading companies.

Fan Jingyu, chairman of Huoqi, stated that in the medium to long term, policies benefit not only leading companies but also standardized companies, and small and medium-sized enterprises also have opportunities to achieve results. Within a clear framework, companies can proactively adjust and explore clearly defined content.

From a logistics perspective, Xiao Mengxue, deputy general manager of Shenzhen Xiaofeixiang Modern Logistics Information Technology Co., Ltd., pointed out that the state and customs have simultaneously introduced policies for electronic cigarette products, changing customs tax numbers, tax systems, tax rates, and regulatory conditions, which is a good thing.

She analyzed that previously, there were difficulties in the operation of electronic cigarettes in air and sea transport, with challenges in export and high freight costs. Through this policy change, companies can cooperate with relevant supervisory agencies to produce some formal documents, better securing some air and sea transport resources for exports.

According to Zheng Zhi, founder of Shenzhen Ziyuan Technology Service Co., Ltd., from the current public solicitation of opinions on the "Electronic Cigarette" national standard, there are clear requirements from both physical and chemical aspects, and the entire process from product development to use is based on safety logic, which will provide ultimate protection for the development of industry enterprises.

"Companies cannot do whatever they want. Only by leveraging their own advantages can they continuously enhance their core competitiveness. Each company must focus on its own strengths to truly form a common development of the industrial chain," Zheng Zhi stated.

Tianfeng Securities analyst Jiang Menghan said: "In the short term, the growth rate of the domestic market will slow down. However, based on current tracking of the industry and policies, the overall investment sentiment and valuation will recover and improve as regulatory measures gradually take effect next year.

According to Jiang Menghan's observations, many people have reached a consensus that policies are conducive to the compliant development of the industry, and as long as the transition period is passed, the entire industry will usher in great development opportunities.

Regarding expectations for subsequent policy formulation, Jiang Menghan expressed hope that the state will continue to adopt a supportive attitude towards domestic export-oriented enterprises in future policy formulation, as overseas markets are the mainstream consumption areas for the entire vaping technology industry or electronic cigarette products.

Yang Haibo stated that Bao'an District has the world's largest vaping electronic cigarette manufacturers and brand owners. To respond to changes in the industry, Bao'an District will soon issue some opinions to support industrial development.

Yang Haibo revealed that Bao'an District is studying the "mother factory" initiative, where "companies can relocate some manufacturing overseas, but some core processes of small trials and pilot tests will still remain in Shenzhen and Bao'an, and the mother factory model is conducive to coping with industrial relocation and competition from foreign counterparts."