The Chinese regulator has made it clear that it will not tolerate attempts to circumvent regulations by disguising production as another activity. Capacity expansion will only be possible in exceptional cases – when the manufacturer demonstrates that additional products will be exported.
At the same time, mergers and acquisitions were allowed to organize the market and limit oversupply.
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Part of a larger fight against deflation
The decision regarding the vape industry is part of Beijing's broader offensive against overproduction and aggressive price cuts, which hit companies' profitability and slow down economic growth.
The day before, new guidelines were introduced for the automotive sector, prohibiting the sale of cars below production costs. This is a reaction to data showing nearly 20%. decline in passenger car sales in January.
At the same time, proceedings against digital giants such as Alibaba and Meituan are ongoing. Authorities are trying to stop a competitive model based on constant price gouging – beneficial for consumers, but devastating for companies and their margins.
Read also: A sudden change in China's strategy. This is about electric cars in the European Union
E-cigarette market. More and more regulations
Although the Chinese decision concerns the local market, a similar regulatory trend can be seen in Poland. The government is systematically tightening regulations on e-cigarettesextending excise tax to further categories of nicotine products and limiting their availability.
The effect is similar to China – slower market growth and pressure on company consolidation.
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