China is the biggest cultivator of industrial hemp in the world, but most of the CBD produced has to be exported because of regulations that only allow the consumption of hemp for textiles and cosmetics. Because of extremely harsh penalties for cannabis consumption, China has one of the lowest usage rates in the world, and that comes along with a lot of negative stigma towards these products. However, China has begun to flex their technical expertise by filing for hundreds of patents related to cannabis and hemp, which could suggest that the government has recognized the economic potential beyond farming and textiles.

Cannabis has been illegal in China since 1985, after the country signed onto the United Nations Convention on Psychotropic Substances. There is not only harsh cultural renunciation of all things cannabis, there are harsh criminal codes as well, which threaten smugglers, traffickers, or producers of cannabis with 15 years in prison, life terms, or even death sentences. The legality on CBD and hemp in general is a little more lax, and has undergone many recent changes.  

China changed its stance outlawing hemp in 2010, allowing farmers to produce the crop on a province-by-province basis if local governments and authorities approved. In the province of Yunnan, farmers who had long struggled against the regulation were granted permission to resume production. At that point (and still today), Chinese-grown hemp was used primarily in the production of textiles, for instance as material sold to the federal government for the production of Army uniforms.  

The production of CBD products is also technically legal in China, so long as manufacturers have gained government approval. Farmers must first operate in a province where the industry has been approved, which for now includes only Yunnan province in the south and Heilongjiang in the northeast. While Jilin, a neighbor to Heilongjiang, is working on legalization of the hemp industry, it has not yet caught up.

Producers must also make themselves available to the strict monitoring required of hemp producers by the Chinese government. Local and federal policing efforts include placing multiple security cameras with live feeds to police stations. Despite these tight controls, Chinese companies had managed to secure 309 patents related to cannabis by 2017 – more than 50% of all cannabis-related patents in the world (606 at the time).  

Sales of CBD products are also strictly regulated within China – for now, consumption is limited to hemp as a textile or cosmetic, which means most of the CBD created in China must be exported to countries like Canada or the US where there is demand for ingestible oil. China does permit the use of hemp seeds in foods but compared to the potential CBD health supplement industry, the textiles and hemp seeds market is small.

The nascent interest in CBD is unlikely to change China’s hard-line stance on marijuana. Trafficking in THC can lead to a life sentence or even the death penalty, so China has a one of the lowest incidences of current cannabis use in the world. At a news conference in spring 2019, Liu Yuejin, deputy director of the National Narcotics Control Commission, said the momentum toward legalization in other countries meant the Chinese authorities would ”more strictly strengthen the supervision of industrial cannabis."

Any person who cultivates any plant of the genus cannabis faces an HK$100,000 fine and 15 years in prison. Still, the amount of cannabis seized by Hong Kong police increased 238% in the just the first 10 months of 2017. Weihua reported, “For many Chinese, marijuana is a drug and therefore synonymous with opium, a much more potent substance that the British forced upon the Chinese during the Opium War. The war was widely regarded by Chinese as the start of their country's ‘century of humiliation’.”

China's history, drug wars, and communist control have left citizens convinced that drugs are personally and socially evil.

The hotbed of hemp cultivation in China is the southwestern province of Yunnan, which was the first province to make it legal to farm low-THC cannabis on an industrial scale. One of the first companies to receive a permit for growing hemp, Singapore-based CannAcubed, operates a growing and processing operation in Yunnan. According to the company's CEO Glenn Davies, the estimated output of this operation is near 20 tons of CBD oil, and at $4,000 per kilogram of CBD oil, the company's annual yield should earn approximately $80,000,000.

In May of 2019 the New York Times reported that the Yunnan government had only issued permits specific to processing CBD. One of those licenses went to Yunnan Hansu Biotech., also known as Hempsoul, a company with more than 36,000 acres of land to cultivate hemp. Hempsoul is a subsidiary of Hanma Investment (HMI) Group, a vertically integrated Chinese CBD supplier.  In February, the province granted a license to three subsidiaries of Conba Group, a pharmaceutical company based in Zhejiang Province. Last January (2019), Zhejiang Conba Pharmaceutical Co Ltd (CONBA) announced that they had managed to obtain several permits to grow hemp. The Chinese government started by allocating 200 hectares to the project. However, the ‘experimental phase’ did not last long. Indeed, 1,600 hectares have now been allocated to CONBA.

As mentioned above, the province of Heilongjiang has also invested in the hemp industry, attempting to garner investment and provide economic benefits to local farmers. International energy-production and solar panel company Sky Solar Holdings has established a subsidiary, Sky Green Sunwu, to take advantage of the friendly regulatory environment. In July 2017, Sky Green was permitted to begin planting a hemp crop variety approved by and registered with local authorities. The company claims a planting area of 40,000 mou (roughly 6,600 acres) of hemp seed, and is also in the process of securing licenses for the production and processing of hemp, which it intends to incorporate into a vertically integrated business model.

A company based in the city of Qingdao (Shandong Province), Huaren Pharmaceutical, said recently it was applying for permission to grow hemp in greenhouses, which already line the landscape around Kunming.

Yooya has become an E-commerce platform for high-end CBD beauty products. It is Asia's first CBD only E-commerce site and will eventually serve regions outside of China.

Tan Xin, president of Beijing-based Hemp Investment Group, one of the largest Chinese companies advocating the commercial pharmaceutical use of the plant, said the company had partnered with the People's Liberation Army to take the Chinese technology and product to the world.  A drug to treat traumatic stress disorder jointly developed by the company and the Chinese military was nearing completion of clinical trials.

• Beauty and wellness sector will be one of the main drivers of CBD growth in China

• The biggest swing here would be if China allowed consumption of CBD products, which is possible and may occur faster than expected

• For the farmers, the crop is green gold — hemp brings in more than 10,000 yuan (US$1,500) per hectare, compared to just a few thousand yuan for more common crops like corn

• China is moving strategically on the medical cannabis market; China’s move from an ‘experimental’ to a pre-industrial phase is proof that the country has understood the economic potential of the hemp industry