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The Chinese CBD Market

Posted by Tabitha Steemson on
The Chinese CBD Market

It is no secret that the Chinese market is the largest in the world. In 2019, the e-commerce market was worth $1.94 trillion – over three times the size of the US market, which ranks second. There is a current trend of growth towards CBD in China. Many experts have compared this growth to that of the CBD boom in the USA went through in 2013.

What is the Current Law surrounding CBD in China? 

There are different rules across China regarding both the product and consumption of CBD.  In the provinces in Yunnan and Heilongjiang, it is legal to produce and cultivate Hemp. It is not legal to cultivate Hemp in other areas of China, however.

The majority of this Hemp is produced for export, as it is legal for Chinese producers to export CBD to the European and American markets. Edible or ingestible CBD is not legal in China, however, there are certain applications that are permitted. In 2015, CBD was approved for cosmetic use. CBD topical creams, treatments or balms are permitted by law. This market is, therefore, rapidly growing within China. 

Is CBD produced in China?

There is an ancient history of Hemp production in China. Although it was prohibited until Yunnan changed their laws in 2010, the history enabled them to quickly begin large-scale hemp cultivation.

It is currently reported that China produces over half the hemp globally. The government does not released official cultivation and sales data, however, it is estimated that in 2018, hemp sales in china exceed 1.2 billion USD.

The cultivation of hemp in China is only growing. The production of this Low-THC (under 0.3%) cannabis sativa plant has increased exponentially in the years since it’s legalisation. In 2019, the USDA estimated that around 66,700 hectares of hemp crop were planted in China.

Although much of Chinese hemp is currently used for fabric and materials, there is a growing percentage being used to cultivate CBD and cannabinoid products.

What are the benefits of Chinese produced CBD?

There are many benefits of Chinese CBD production. The growing conditions in China are highly suitable for hemp cultivation. Although hemp production was prohibited in 1985, since legalisation in 2010 many of the ancient techniques have been readopted.

Due to the large scale of Chinese production, the costs associated are much lower than in other areas. The costs of land, seeds, labour, and energy are all cheaper than the US or Canada. It has been estimated, therefore, that brands could save 30-40% of production costs by producing in China.  

Is there a market for CBD in China?

The growth in the Global market for CBD has led to changes in legislation within China. Not only have the laws surrounding growth and cultivation of cannabis changed, but also laws are beginning to change surrounding consumption of non-psychoactive cannabinoid products.  

As noted, in 2015 topical CBD use was permitted for cosmetic use. Although this is still an emerging market, the potential in China is huge. The online beauty industry in China is the largest in the world, having grown so rapidly it recently surpassed the United States. Skin care in particular has driven this growth, and it is within this category that products such as CBD balm and CBD moisturiser sit.

Prior to the Corona virus pandemic, the e-commerce market in China was already the largest globally, with a volume of 1.94 trillion USD in 2019. Although the pandemic has grown all global online shopping markets, it is expected to have an exponential rate of growth in China, increasing its margin as the largest considerably. The online success of beauty and skincare brands in China results, therefore in considerable opportunity for CBD cosmetics in the country.  

Although they are not yet legal, there is also a huge potential market for consumable CBD goods.  The FDA and UN regulations on CBD will certainly accelerate legal changes within China. There are over 350 millennials in China, with an increased spending power. This group has accelerated the growth of the cosmetics industry in China. It is not doubted, therefore, that consumer interest for CBD will experience the same exponential growth in China as it has in the US, Europe and Canada.

It is not only the younger market that demonstrates considerable market value for CBD in China. The ageing population in China is higher than the Global benchmark - 1.4% of the citizens are 65 or older and 17.3% are 60 or older. This population sector has a long-standing tradition of herbal medicine and treatment, as the practice of Chinese medicine is ancient and engrained culturally. The acceptance of prescription CBD medicinal products would have considerable benefit to this population sector, providing help for chronic pain and mental illness conditions.

Are CBD cosmetics popular in China?

Although it is still an emerging sector, looking at the growth of CBD cosmetic ranges in China demonstrates how successful a national role out of CBD consumables could be.

Many CBD based topical products have been launched to the Chinese market since 2019. In this year alone, there were 433 request by cosmetic companies to use CBD extract as an ingredient in product. The growing rate of the beauty industry will, no doubt, continue this trend.

A demonstrable area in which CBD as a cosmetic ingredient has had success is in the facial sheet mask category. 24% of CBD products currently sold in China are sheet masks. The is not only because sheet masks are incredibly popular amongst the chinese population. They have a low barrier of entry (manufacturing is cheap and the research and development process is short). Moreover, as they are only single use, there is a trend to constantly innovate and redevelop the ingredients and properties of these masks – when only buying individual products that are used once, customers are inclined to try new things constantly.

Large Chinese cosmetic brands have adopted the CBD trend. For example, ‘One Leaf’, a top ten face mask brand in China, is currently promoting its CBD products through influencer campaigns and Chinese online marketplaces.

Will China Legalise Cannabis?

As seen, FDA and UN legislation will guide the Chinese policies on CBD. It is not unlikely; therefore, that consumable CBD will be legalised in China within the next 5-10 years.  

It appears to be a trend (as has been shown in the US) that with the legalisation of CBD, the legalisation of medicinal cannabis follows. Some experts predict this pattern in China, particularly as there is already a long history of herbal medicine. Despite this, it seems unlikely that recreational cannabis will be legalised in the country. The current Chinese drug policy is extremely strict, with the death penalty even being issued in certain circumstances, and therefore it is unlikely that recreational drug use will be permitted in the country.

It is evident that there is a growing CBD market in China. For those within the sector, it seems the obvious place to go next.

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