China's State Tobacco Monopoly Administration released a draft policy on Thursday to reduce excess capacity in the e-cigarette sector and tighten enforcement of production and export standards. This follows a State Council opinion earlier this month that imposed stricter oversight on e-cigarettes and nicotine pouches.
The e-cigarette industry in China is grappling with challenges such as the slow exit of outdated capacity, structural imbalances, and poor compliance with export rules, with the new draft policy specifically highlighting “involution-style” competition as a concern.
“No investment in new projects shall be permitted, and relocated or reconstructed facilities shall not result in any increase in production capacity,” the policy states. In principle, it also forbids expanding capacity through on-site technical renovations.
Stronger oversight of production capacity is a priority, mandating companies to operate strictly within approved limits, with any adjustments requiring additional approval and updated licensing. The measures aim to address compliance issues and promote orderly development in the sector.
Reports indicate this responds to weak enforcement of standards in e-cigarette production and exports, potentially affecting firms in areas like Shenzhen. While brands like iQOS are not directly named, the tightening regulations could impact global supply chains.