China is cashing in on the booming CBD industry even though cannabis is illegal in China and could even mean death penalty if found with any cannabis product not strictly intended for industrial use
- China is making huge returns on the current CBD boom even though cannabis is illegal within its borders
- Yunnan became the first province to legalize industrial cannabis use which facilitated for the manufacture of hemp from which CBD is derived
- The current market prices of CBD are steadily falling even though the market keeps on increasing by the day
- US farmers believe that the enactment of the 2018 farm bill will regulate prices while leveling up the CBD craze
China is among the world’s leading economies coming second after the US while also doubling up as the biggest importer to the US, most of which these goods are electronic components. While China also tops as the provenance of most counterfeit goods, it seemed they identified a new unregulated market, which is the rising cannabis boom in the US.
Hemp and CBD use and status in China
For centuries now, hemp has been grown in China for a variety of uses, textile and alternative medicine being the major uses. This large scale cultivation of hemp positioned it at a great advantage when the CBD craze came along; CBD is now used for literally anything from sleep disorders to healing ailing household pets.
China is among one of the world’s known countries for having very strict regulations when it comes to drugs. But as it currently stands, the Chinese government has legalized industrial cannabis in only a few of its 34 regions. Even though the government has facilitated for industrial use, cannabis and cannabidiol extracts use in China is still illegal.
At the heart of it all is the Yunnan province, located in China’s southwestern region, it was the first province to enact this legalization. Vast fields of farmland cultivated with tall hemp plants cover horizons, which are not mechanically harvested, but by hand. The harvesting period is usually during the fall where they are sun-dried and then CBD is extracted, and then bottled for export as balms, sprays, oils and supplements.
In Shanchong for example, a slightly bigger village situated in a remote valley on the western side of Kunming, the village cultivates close to 2,000 acres of hemp, a type of cannabis used in paper, rope, and fabrics. Here, there is a huge gleaming factory that began its operations two years ago, close to a restricted zone situated very close to a weapons producer. In this factory, cannabidiol gets extracted in crystal and oil form from the crop.
According to researchandmarkets.com as of 2018, China held 11% of the total worldwide CBD market share of approximately $708M, which came second after the US and Europe, a fact that they are working hard to outdo, even though the regulations in the country will not allow.
Well, there seems to be no chance of legalizing cannabis in China. However, such is not the case in a number of European countries and the United States, where there is an ease of cannabis stigma. Many states in the U.S. and some of European countries have some systems in place that legalize medicinal use for cannabidiol, a reason why many Chinese organizations seem to be in a rush to ensure that they fill this void.
Chinese CBD Industry
The CBD industry is slightly past its infancy stages but still maturing, though this has not deterred manufacturers and investors from investing large chunks of lands to the cultivation of cannabis. Henri Sant-Cassia, a CBD advocate was astonished by the fast pace China was moving in regards to CBD production.
The CBD craze has taken Chinese hemp manufacturers by a storm with whom some provinces are either at the brink of legalizing industrial use or are laying prospects of the legalization. After Yunnan, Heilongjiang(northeastern border with Russia and Serbia) become the second province to legalize industrial cannabis farming. Jilin, which is a neighboring province, also has prospects to legalize though not finalized.
This influx in hemp producers has an overall toll on international CBD prices. According to Tan Xin, the chairman of Hanma Investment Group, a CBD investor/ manufacturer in the Yunnan province, the prices in the US plummeted from approximately $25,000/ lb in 2013 when they had just entered the business to approximately $3,000/ lb in 2018 and will likely to fall to $500 per pound in 2020 if the market remains as it is.
Though Tan believes they will still be in business provided the prices don’t fall beyond $150/ lb which facilitates them to cover overhead costs and labor and still collect a profit margin.
Besides all the numbers, China does not seem to be bending its take on any other use of cannabis. If found with any THC product, one faces a life long prison sentence for the death penalty. China strictly oversees the manufacture of the cannabis industry to ensure that no other form of the product is derived except CBD.
What this means for CBD farmers in the US
After the 2018 farm bill was enacted, which ensured hemp was an ordinary crop, the US took the challenge head-on. More farmers are now joining the hemp industry opting for large scale cultivation of this crop. States like Tennessee and Oregon are seeing farmers allot more of their land to the cultivation of hemp which will be a direct competition to the Chinese CBD. US farmers believe that having a locally cultivated and manufactured CBD will highly resonate with the US market and cut out China’s increasing supply of CBD products.
So, while China currently commands a significant lead in the cultivation of cannabis, there are claims that the quality of cannabis coming from China is wanting. Adding to this, many people in the United States and Europe don’t really mind about the quality of cannabis that much. As long as they get what they want, then they don’t mind a lot about matters to do with quality.
All in all, the global market for cannabis is witnessing an unprecedented boom, especially after being widely legalized in many places across the globe. In all these, China appears to have its eyes set on dominating this trade. As of now, though, China continues to cash in on cannabis following rising demands for cannabidiol in plenty of countries and regions across the globe.