When it comes to hemp-derived CBD, China is starting to notice.
Hemp has been cultivated in China for thousands of years for industrial purposes, including fiber and seed, and the nation is the number one producer of hemp fiber in the world, growing almost 50% of the world’s supply, according to the United States Department of Agriculture’s China: 2019 Hemp Annual Report. In recent years, consumer demand for hemp-derived products containing CBD, most often cosmetics, had started to increase, catching the attention of investors and entrepreneurs.
But when it comes to these products, there is no national legal framework, despite rising consumer awareness. This, industry insiders say, is the biggest hurdle in trying to develop a full-fledged hemp-derived CBD products industry in China, and solidifying China’s position as a top global player.
At the local level, though, things are changing. Over the last few years, governments in traditional hemp-growing regions have laid out regulations to create room for the growth of the hemp-derived CBD industry. Yunnan Province, in southwestern China, was among the first.
The Yunnan Province Industrial Hemp Planting and Processing Regulation, a government decree issued in late 2009, was enacted on January 1, 2010, officially legalizing “hemp-derived products/extracts of hemp” for the first time in any province in the country. It defined industrial hemp as the cannabis plant and its extracts that contain less than 0.3% of THC.
The cultivation, processing, transportation, and the storage of hemp, as well as the participating companies’ production sites, equipment, and human and financial capital, are strictly regulated by Yunnan’s public security bureaus on the municipal or provincial level. Each license is only valid for two years. Cultivation license types include: hemp cultivation for the purpose of research, hemp cultivation for the purpose of seed production, and hemp cultivation for industrial purposes. While processing licensees must tell public security bureaus what they are processing the hemp into, that information is not made public. (Hemp cultivation licenses for research or seed are issued on the provincial level, while licenses for cultivation for industrial purposes and processing are issued on the county level and by jurisdictions above it, which would be the municipal level in China’s case.)
The Yunnan Public Security Department, which is in charge of approving hemp cultivation for the purpose of research or seed production, has issued a total of seven licenses of this kind between 2010 and 2020, according to public information obtained by Cannabis Wire. Three of those were issued by 2011, and were given to a university, a research institute, and one company; they were renewed every two years in the following years. A fourth entity wasn’t licensed until 2019, followed by another three—to two pharmaceutical companies and a university—in 2020.
On the municipal level, Kunming, the capital of Yunnan Province, issued only nine licenses, including two renewals, for either hemp cultivation or processing from 2013 to 2018. By comparison, twenty-six new licenses and five renewals were issued in 2019 and 2020. In total, five licenses in the municipality are for processing.
Yunnan, on the municipal and county level, granted 152 companies a license for hemp cultivation for industrial purposes between January 2019 and June 30, 2020, while only fourteen entities were given permission to process hemp in the same period, according to public information obtained by Cannabis Wire.
China’s caution comes down to concerns over THC, according to Shuquan Zhang, director of the Economic Crops Research Institute of Heilongjiang Academy of Agricultural Sciences. “It’s very difficult to regulate,” he said. (Indeed, such concerns have factored into regulations in the US, where cannabis containing .3% THC or less, also known as hemp, was legalized by the 2018 Farm Bill.)
Heilongjiang, a province in northeastern China, modified its anti-drugs regulations in 2017, differentiating hemp from marijuana and regulating the former. It also passed a special action plan the next year to regulate and promote hemp cultivation and extraction, though it doesn’t explicitly mention CBD. The neighboring Jilin Province has taken similar actions, and is expected to be the third province to liberalize hemp cultivation and processing.
While Yunnan has started to explore hemp processing for the utilization of cannabinoids, the industry in Heilongjiang, a province in the far northeast corner of China, still focuses largely on cultivation and processing for fiber. Zhang predicts that there will be some regulatory movement in Heilongjiang to allow hemp processing for CBD in early 2021.
“Policies and regulations are crucial to the development of the industry, and technology comes after it,” said Zhang, who specializes in hemp. “Without legal breakthroughs and legal guarantees, it’ll be very difficult to develop this industry.”
Meanwhile, the topics of hemp and CBD are starting to percolate into national discussions. In May, in 2020’s Two Sessions—China’s top political meetings, where policies and regulations are discussed and economic goals are set—a proposal to boost the hemp industry was put forward by a local politician. It was the first time that hemp and CBD had been discussed in this political context. Later in September, Kunming, the capital of Yunnan Province, announced a new initiative to accelerate the development of hemp and CBD with government funding and subsidies.
Still, Xin Tan, Chairman of HMI Group, one of the earliest and biggest players in China’s rising hemp-derived products industry, says current policies deliver a positive message from the government and will point the industry in the right direction. HMI Group owns a company that is one of the first to get a hemp cultivation license in Yunnan Province. “The government’s funding is not comparable to the capital in the market, but it works as an incentive,” he said. “Such industrial policies and funding will help the industry gather momentum.”
History might also play a part in Chinese consumers’ acceptance of hemp and CBD being used in new products. China has a deep history of cultivating and using the cannabis plant as fiber, medicine, and food. The medical use of different parts of the plant has been recorded in Chinese medical texts, including the Compendium of Materia Medica, for almost 2,000 years, according to research by Hong Kong Baptist University.
In modern times, the Chinese Pharmacopeia has recognized huomaren (火麻仁)—cannabis fructus, the dry seeds of the cannabis plant—as a moistening laxative in Chinese medicine, while China’s Ministry of Health (now the National Health Commission) listed huomaren as both medicine and food in 2002.
Industry players like Tan remain optimistic, despite the slow pace of change. “It’s like the internet twenty years ago. The internet provided people with an online platform for communication and messaging, but there weren’t many clear regulations back then,” said Tan. “It was a gradual process for regulations to be perfected. Hemp is just like that.”
Still, Zhang, of the Economic Crops Research Institute, acknowledges the prospects of the hemp industry, but he also calls for a level-headed approach. When it comes to a new product derived from hemp, “We cannot exaggerate its benefits, nor can we say it’s useless,” he said. “Scientific verification and the support of clinical data are needed.”
