State Tobacco Administration: Strictly implement the policy requirements for restricting the electronic cigarette industry, promote market supply and demand balance.

On February 13th, the State Tobacco Monopoly Administration issued a notice "Regarding the Implementation of the Electronic Cigarette Industry Policy to Further Promote Supply and Demand Dynamic Balance". It mentions the regulation of enterprise investment behavior. Strictly implement the restrictions on the electronic cigarette industry policy, no new projects should be invested in, and projects for relocation, reconstruction, and construction should not increase production capacity. Promote market supply and demand balance. Strictly implement total production scale control, adhere to a classified approach, reasonably determine production scales according to the business conditions of enterprises, carry out production scale adjustment reviews rigorously and strictly, and reasonably determine the adjustment amount of production scale for electronic cigarette-related production enterprises. The original text is as follows: Notice from the State Tobacco Monopoly Administration on Implementing the Electronic Cigarette Industry Policy to Further Promote Supply and Demand Dynamic Balance Provincial-level Tobacco Monopoly Administrations: In order to implement the electronic cigarette industry policy, standardize the industry operating order, comprehensively rectify the "cut-throat" competition in the electronic cigarette industry, resolve and prevent the risk of overcapacity, enhance the compliance level of electronic cigarette-related production enterprises, in accordance with the "People's Republic of China Tobacco Monopoly Law" and its implementation regulations, "State Council Office on Opinions on Full-Chain Crackdown on Illegal Activities Related to Tobacco" (State Council Office [2025] No. 44), "Catalogue of Industrial Structure Adjustment Guidance (2024 Edition)", "Electronic Cigarette Management Measures" (State Tobacco Monopoly Administration Announcement No. 1 of 2022), "Several Policy Measures (Trial) for Promoting the Legalization and Standardization of the Electronic Cigarette Industry" (State Tobacco Administration [2022] No. 43), etc., legal The laws, regulations, rules, and normative documents such as regulations are hereby notified about the work related to further promoting the supply and demand dynamic balance of the electronic cigarette industry. 1. Standardize enterprise investment behavior. Strictly implement the requirements of the electronic cigarette restricted industries policy, no new projects should be invested in, and relocation and reconstruction projects should not increase production capacity. The general technical renovation of the original site (including the purchase of production equipment) project generally should not increase production capacity. If it is necessary to increase production capacity, it should comply with the electronic cigarette industry policies, regulatory policies, and capacity management regulations, the capacity utilization rate is at a relatively high level, there is a real and continuously increasing market demand, and there are safety, sanitation, environmental protection facilities, equipment, and technical conditions that are compatible with production operations. It conforms to the direction of intelligence, green, and integration, and strictly follows the relevant procedures in accordance with the "Regulations on the Administration of Fixed Asset Investment in Electronic Cigarettes" (State Smoke Law [2024] No. 104) 104) Requirements to fulfill the procedures. Enterprises whose main focus is export sales should prove that the products produced by the increased capacity meet the legal requirements and regulatory requirements of the destination country (region). The original technical transformation and expansion of production capacity of electronic cigarette-related production enterprises shall not lead to an increase in the total production capacity of the electronic cigarette industry. Electronic cigarette-related production enterprises are not allowed to increase the number of production lines, capacities, or add accessory production lines in violation of regulations. They are not allowed to outsource major production processes to unlicensed enterprises for processing. It is forbidden to expand production capacity in disguised form and evade fixed asset investment approval. The investment of electronic cigarette-related production enterprises or the integration and reorganization of production capacity should comply with antitrust laws, regulations, and relevant provisions. 2. Strengthen the regulation of electronic cigarette production capacity. Adhere to the market demand-oriented approach to promote the supply-side structural reform of the electronic cigarette industry, coordinate enterprise equipment levels, business conditions, and industry trends, implement electronic cigarette confirmed capacity management in accordance with the principles of "fair, open, classified, and stable". Reasonably determine the capacity based on the company's operating conditions, strictly prohibit production and operation beyond the confirmed capacity, companies that need adjustments should apply for re-confirmation of capacity and complete the permit handling procedures. For commissioned processing operations, the commissioning party should conduct commissioning within the confirmed production scale, and the commissioned party should undertake commissions within the confirmed capacity and confirmed production scale. For electronic cigarette production enterprises with low capacity utilization but still engaging in outsourced production, the confirmed capacity should be reduced according to the company's business conditions. The integration of production capacity of the same control entity under the same enterprise or within the same enterprise should be in a more concentrated area with a better foundation for the electronic cigarette industry. The place of residence and production point of the enterprise should generally be at the same address, and for enterprises that meet the electronic cigarette industry policies and regulatory policies, the production capacity of the production point should be integrated into the place of residence and the original production point should be canceled. The place of residence should be in a better area with a relatively concentrated area of electronic cigarette industry. 3. Promote market supply and demand balance. Coordinate the effective functions of the market and the government, determine the annual production scale within the confirmed capacity range as the company's annual production and sales target, effectively resolve and prevent the risk of disorderly competition in the market. Strictly implement total production scale control, adhere to a classified approach, reasonably determine production scales based on the company's operating conditions, carry out production scale adjustment reviews rigorously and strictly, and reasonably determine the adjustment amount of production scale for electronic cigarette-related production enterprises. Continue to strengthen electronic cigarette supervision, strictly restrict high-risk market entities, focus on inspections and controls, and severely punish illegal activities such as exporting back, false declaration, products not meeting national standards and quality and safety requirements. Enterprises involved in the production of electronic cigarettes should fulfill their main responsibilities, strengthen the construction of compliance and regulatory capabilities, and submit documents proving compliance with the legal requirements and regulatory policies of the destination country (region) for export products. It is necessary to promote the full compliance of the entire chain of export trade.