China’s CBD Sweet Spot Has Passed

What happened: China’s National Medical Product’s Administration has now formally banned the use of cannabis compounds in cosmetics. This follows a proposed ban in March and Chinese retailers have been urged to remove any CBD cosmetics from their shelves. However, products imported or produced before May 28 can still legally be sold. In 2015, a beauty ingredients regulation stated that cannabis fruit and seeds were allowed to be used as components of cosmetic products. Since then, the demand for CBD in the beauty category has been slowly growing in China. Now, all mentions and hashtags of CBD have already been removed from platforms like Weibo and Little Red Book. 

The Jing Take: China’s CBD market size reached about $118 million in 2020. Simpcare, a major local CBD player founded in 2019, succeeded in raising millions of dollars and has grown into one of the country’s most hyped e-commerce beauty brands. Given its untapped potential, this announcement will be an unwelcome blow to a nascent economy. 

Globally speaking, however, it likely won’t affect the current state of the CBD skincare market, which is projected to reach $3.48 billion by 2026. What’s more worrying is the likelihood of China shoring up its domestic sector: Shanghai is tipped to become the next beauty capital of the world and C-beauty brands are now on the rise. 

Given the dynamism of the fiercely competitive local market, and the ability of founders to innovate and pivot, this move presents an opportunity for entrepreneurs to cultivate new frontiers in the wellness and beauty categories. At least 190 companies were involved with CBD, while over 50 companies have gained licenses for industrial cannabis cultivation in recent months. Let’s see what they do next. 

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.