Welcome to this week's Skinny on China

Welcome to this week's Skinny on China. For many years now, anyone searching for hemp or a related term on Baidu (China's Google) receives a message reminding them to live a healthy life with no drugs, accompanied by a link to the China Anti-Drug network. It is representative of the firm hand that Beijing takes on controlling narcotics - a legacy from Qing Dynasty's crackdown on British opium smugglers in the mid-19th century. The result of this anti-drug stance has seen Chinese consumers have limited exposure to the legal cannabis economy that is taking off in many markets around the world. Hemp was used in the daily lives of Chinese people from the 11th to 7th century BCE, and since becoming legal to grow on an industrial scale in 2010, China has become the largest producer and exporter of the plant. Yet was only recently that we saw the green shoots of cannabidiol entering consumer packaged goods in China. Cannabidiol (CBD) has been one of the big risers in China's cosmetics category over the past few years. The anti-inflammatory and immunity-restorative properties are alluring features that complement the country's wellness beauty movement. Since China legalised the use of hemp leaf extract in cosmetics in 2015, the CBD category has taken hold. In 2019, 433 requests were submitted to the China Food and Drug Administration to use cannabis sativa leaf extract as a product ingredient in beauty products. By 2020, there were 880. Curiosity about CBD cosmetics is also reflected by the number of social media influencers and daigou who show off products from abroad. The consumer panel feeding into China Skinny's Skincare Tracker say they are more likely to buy skincare containing hemp leaf essences than cosmetics not tested on animals. Overall, the outlook was sunny for CBD cosmetics in China. But just as they have started to find their rhythm, the dream looks to be over. Late last month, China's National Institutes for Food and Drug Control (NIFDC) proposed a ban on the use of cannabis and cannabis extracts in cosmetics. There were three main reasons for the change in heart: 1. Cannabis cosmetics shared online will have an adverse impact on Beijing's anti-drug education for youth; 2. Concerns around poor third-party testing standards could see products end up much more potent than allowed; and 3. There are alternative ingredients which can achieve the same result as CBD and cannabis-related ingredients. Based on our experience, the proposed ban is as good as law. The CBD ban will not just apply to general trade cosmetics, but will also likely prohibit sales via cross-border ecommerce channels. This will close the channel that is often used to get around regulations, particularly in the cosmetics category. China is very sensitive to anything associated with drugs due to its history, so the U-turn on the 6-year old regulation amendment is not entirely surprising. Brands in China always need to be across regulatory changes - companies as diverse as Google to infant formula brands will confirm this. Those in product categories that are historically sensitive should be particularly cognisant that regulations and legislation aren't always becoming more liberal in China. One positive regulatory liberalisation was the recent announcement of loosening animal testing restrictions on imported cosmetics, yet there are still some hurdles to overcome. In the legislation's current form, it appears that the removal of the animal testing requirement will only apply for cosmetics products with Good Manufacturing Practice (GMP) certificates issued by a government body. In many countries, GMP certificates are currently issued by organisations such as industry associations, which are not government bodies. Senior level discussions are taking place in hope of resolving this.