Online e-cigarette sales looked like a promising industry for Edwin Wong when he started his venture a year ago.
The 34-year-old had studied Shenzhen’s businesses and products since 2012, and saw a sure bet. Soon, he had developed a loyal base of more than 600 repeat customers, and business was steady.
Then suddenly, everything changed. Overnight his 2.2 million yuan (US$312,398) investment in a startup, called KiwiPod, disappeared.
“A lot of people have gone into this business who never knew anything about the business before, they just threw money into it. Most just thought it was hot, very profitable, and now they are gone,” he said.
Searching Chinese e-commerce platforms such as Taobao or JD.com for “e-cigarettes” — something that would normally yield thousands of options — revealed nothing.
It was as if the online shops never existed.
Rumors were rampant of at least two suicides among the throngs of small-time sellers whose business model had disappeared.
The day everything changed was Nov. 7, when Chinese authorities suddenly imposed a de facto ban on e-cigarettes, issuing an order discouraging online sales to protect children from the hazards of smoking.
The order came out just before China’s biggest annual online shopping holiday, Nov. 11.
China is the world’s biggest manufacturer and exporter of e-cigarettes, according to the China Electronic Cigarette Chamber of Commerce. Last year, more than 2 million people worked in the industry, with annual sales worth 33.7 billion yuan and exports worth 28.7 billion yuan.
In Shenzhen, about 90 percent of the world’s vaping and e-cigarette devices are designed and manufactured in about 1,000 factories. Thousands more companies form the supply chain throughout Guangdong Province and China.
The industry is in damage control after an outbreak of vaping-related respiratory ailments led to at least 39 deaths across the US.
The US Centers for Disease Control is blaming the additive vitamin E acetate used in some e-liquids and said most of the cases were associated with smoking of THC oils, the main psychoactive compound in marijuana.
US President Donald Trump is meeting industry and health representatives, amid indications that the final policy in the US would balance health concerns with economic ones. The US market has already shrunk by about a quarter.
New York City lawmakers last week voted to ban flavored e-cigarettes. The measure, which New York City Mayor Bill de Blasio says he supports, bans all e-cigarette and e-liquid flavors except tobacco.
It is expected to take effect in July next year.
In Shenzhen, the bigger players have fared better than the smaller sellers, and life for them goes on as normal, for now.
The six-story Teslacigs factory is easily missed from the road in Shajing, sitting behind a tangle of tropical brush and amidst a cluster of similar dust-stained buildings.
Inside, about 400 workers quietly assemble new pods and other vaping devices in a pristine, dust-free, temperature-controlled environment, a far cry from the dusty world outside. The factory shows no signs of slowing down. The Chinese market still has potential, managers say, but all eyes are on what the US is going to do.
“We’re investing in our company, and we’re waiting to see what happens with US regulation,” said Xiang Jie, vice general manager of Teslacigs.
“Even with the China regulation, it will eventually be the biggest market, and there are other markets growing, in Southeast Asia, the Middle East,” he added.
The US is currently the biggest market, but also the wild card, those in China’s industry believe.
Manufacturers are waiting to see if the US bans flavored e-cigarettes and what the Food and Drug Administration’s (FDA) policy would be on approving tobacco products (known as a pre-market tobacco product application).
While the FDA says the cost of the review process, which is to be determined in May next year, would top out at about US$460,000, those in the industry in Shenzhen expect it to be much higher.
One manufacturer, who did not want to be identified, says it would likely cost his business US$10 million in set-up costs and business registration, and then about US$5 million for each individual barcoded item.
Qasim Shah, the cofounder of STIG International, has been building a multimillion-dollar vaping business in Shenzhen over the past decade. Originally from Woking, in London’s commuter belt, he ditched his furniture import business and now has a company that makes 4.5 million to 6 million devices a month, mostly for the US, Europe and China.
He says the pushback in China has similarities to what is happening in the US, but may take longer to play out.
“I wasn’t surprised at all. This has been on the table for maybe three or four months. People in the industry knew there was something coming. I didn’t expect an online ban, but the worst scenario would have been to ban e-cigarette sales outright,” Shah said.
Like most other similar-sized brands here, he is waiting to see how things play out.
“There’s no regulatory clarity,” Shah said of both the US and China policies.
“Everyone here knows the government is quite tough and what they say you have to abide by. You get on with it and there are other avenues for the market,” he added.
Bruce Du works as a distributor for about 10 brands of e-cigarettes. He says the mood swings in the industry are a result of Chinese and US policy, trade frictions between the two countries and the influence of China’s tobacco industry.
“I’ve thought of getting out of the business because of all the problems [on the US side],” he said.
“In my opinion, China Tobacco [the state-run monopoly that manages sales and taxes on cigarettes] is trying to push our industry down because if we grow at a faster pace, the market and profit for tobacco will go down,” Du said.
However, Ao Weinuo, head of the Shenzhen branch of the China Electronic Cigarette Chamber of Commerce, is upbeat.
“The electronic cigarette industry has raised great concern in the world, especially in the US and China. There’s a lot of negative press, but we think [e-cigarette use] is a trend that can’t be stopped. As long as we solve the problems of taxation, product quality and safety and measures to protect minors, the industry will have a bright future,” Ao said.
CONFRONTATION: The water cannon attack was the second this month on the Philippine supply boat ‘Unaizah May 4,’ after an incident on March 5 The China Coast Guard yesterday morning blocked a Philippine supply vessel and damaged it with water cannons near a reef off the Southeast Asian country, the Philippines said. The Philippine military released video of what it said was a nearly hour-long attack off the Second Thomas Shoal (Renai Shoal, 仁愛暗沙) in the contested South China Sea, where Chinese ships have unleashed water cannons and collided with Philippine vessels in similar standoffs in the past few months. The China Coast Guard and other vessels “once again harassed, blocked, deployed water cannons, and executed dangerous maneuvers” against a routine rotation and resupply mission to
GLOBAL COMBAT AIR PROGRAM: The potential purchasers would be limited to the 15 nations with which Tokyo has signed defense partnership and equipment transfer deals Japan’s Cabinet yesterday approved a plan to sell future next-generation fighter jets that it is developing with the UK and Italy to other nations, in the latest move away from the country’s post-World War II pacifist principles. The contentious decision to allow international arms sales is expected to help secure Japan’s role in the joint fighter jet project, and is part of a move to build up the Japanese arms industry and bolster its role in global security. The Cabinet also endorsed a revision to Japan’s arms equipment and technology transfer guidelines to allow coproduced lethal weapons to be sold to nations
Thousands of devotees, some in a state of trance, gathered at a Buddhist temple on the outskirts of Bangkok renowned for sacred tattoos known as Sak Yant, paying their respects to a revered monk who mastered the practice and seeking purification. The gathering at Wat Bang Phra Buddhist temple is part of a Thai Wai Khru ritual in which devotees pay homage to Luang Phor Pern, the temple’s formal abbot, who died in 2002. He had a reputation for refining and popularizing the temple’s Sak Yant tattoo style. The idea that tattoos confer magical powers has existed in many parts of Asia
ON ALERT: A Russian cruise missile crossed into Polish airspace for about 40 seconds, the Polish military said, adding that it is constantly monitoring the war to protect its airspace Ukraine’s capital, Kyiv, and the western region of Lviv early yesterday came under a “massive” Russian air attack, officials said, while a Russian cruise missile breached Polish airspace, the Polish military said. Russia and Ukraine have been engaged in a series of deadly aerial attacks, with yesterday’s strikes coming a day after the Russian military said it had seized the Ukrainian village of Ivanivske, west of Bakhmut. A militant attack on a Moscow concert hall on Friday that killed at least 133 people also became a new flash point between the two archrivals. “Explosions in the capital. Air defense is working. Do not