China orders e-cigarette makers to suspend investments on new production plants

China's State Tobacco Monopoly Administration issued a notice on Friday aimed at curbing price wars in the e-cigarette industry, directing manufacturers to address overcapacity by suspending investment projects and the building of new production plants.

"The capacity utilisation rate is at a high level," the notice said, while warning e-cigarette makers against trying to skirt the instruction by building new facilities ostensibly for the production of other products that are in fact manufacturing e-cigarettes.

KEY DETAILS:

Producers should only invest in new projects and increase production capacity if it is really necessary and/or they can prove the focus is on manufacturing e-cigarettes for export.

Notice prohibits e-cigarette makers from shifting supply quotas to other unlicensed companies and expanding production capacity by seeking fresh investment to make other products to disguise e-cigarette output.

E-cigarette makers are allowed to reorganise their production capacity through mergers.

The production line and approved production capacity of e-cigarettes should be strictly distinguished from heated cigarettes and smoking utensils.

-Joe Cash/Reuters