STMA’s latest directive seeks to advance e-cigarette industrial policy and tighten compliance among manufacturers of e-cigarettes, e-liquids, and nicotine used in e-cigarettes. Photo credit: EasypeasyAi.
China’s State Tobacco Monopoly Administration (STMA) issued a directive on February 13 to suspend investment projects and stop construction of new production facilities to curb price wars in China’s e-cigarette sector.
The notice, sent to provincial tobacco monopoly bureaus, aims to further implement e-cigarette industrial policy and maintain what authorities describe as a “dynamic balance” between supply and demand. Regulators said the measure seeks to standardize industrial order, curb “involution-style” competition, prevent overcapacity risks, and strengthen compliance among manufacturers of e-cigarette products, e-liquids, and nicotine used in e-cigarettes.
The regulator said the industry already operates at a high level of capacity utilization and warned companies against bypassing the directive by building new plants under the guise of producing other goods that actually manufacture e-cigarettes.
Under the new guidance, manufacturers may invest in new projects or expand production capacity only when necessary or when they can demonstrate that the additional output is for export markets.
The directive also bans e-cigarette producers from transferring supply quotas to unlicensed companies. It prohibits firms from expanding capacity by seeking new investment in the production of other products as a way to conceal e-cigarette manufacturing.
Authorities will introduce a verified-capacity management system based on principles described as “fair, open, differentiated, steady, and orderly.” Companies may not operate beyond approved capacity, and any adjustments require re-verification and new licensing procedures. Regulators will set each company’s annual production scale within approved limits as its yearly production and sales target, with authorities reviewing any changes under increasingly strict standards and emphasizing total volume control.
For contract manufacturing, both the commissioning company and the contractor must operate within verified capacity limits. Companies that show low utilization while continuing to outsource production may face reductions in approved capacity.
However, regulators allow companies to reorganize production capacity through mergers, including consolidation among entities under the same controlling shareholder or integration of production sites within a single enterprise. Regulators encourage consolidated operations in regions with stronger industrial bases and higher concentrations of manufacturers. In principle, companies should align registered addresses with production sites.
Authorities also warned that firms that fail to meet industrial policy requirements or mandatory standards related to quality, hygiene, safety, fire protection, environmental protection, or energy consumption could face reductions or elimination of production capacity. Export diversion, false customs declarations and non-compliant products will face stricter enforcement.
STMA also directed manufacturers to clearly separate e-cigarette production lines and approved capacity from those used for heated cigarettes and smoking accessories.
The measure forms part of a broader series of regulatory actions since late 2025. In early December, the State Council of the People's Republic of China called for a full-chain crackdown on illegal tobacco-related activities. Its General Office later instructed regulators to closely monitor emerging tobacco products and clarify their regulatory classification.
Later that month, STMA tightened controls on e-cigarette production capacity and investment and issued regulatory updates aimed at improving transparency. On January 5, authorities released draft rules proposing a credit-based regulatory system for e-cigarette companies, signaling a shift toward more institutionalized governance. On January 9, regulators brought nicotine pouches and other oral nicotine products under the tobacco monopoly system, ending a legal gray area and aligning product definitions, regulatory classification, and industrial policy.
The latest directive extends this regulatory campaign to production structures and capacity management across the e-cigarette industry.