China’s vaping market used to be fast-growing and free-for-all. Now it’s a tightly controlled, state-run system. Retail sales peaked at RMB 19.7 billion (USD 2.9 billion) in 2021 and then shrank to USD 2.67 billion. Rather than suppressing the market, strict regulations just changed how brands compete. Today, there are two markets running side by side: a heavily regulated legal market that mostly serves existing smokers and an underground digital market that still sells the flavored products banned by the government.
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How the “1 + 2 + N” rules changed everything
In 2022, China’s State Tobacco Monopoly Administration implemented the “1 + 2 + N” framework, a set of rules that put the whole vaping industry under state control. It routes all sales through official government-run trading platforms, forces every producer and retailer to get licensed, and bans all non-tobacco flavors outright. Together, the rules completely rewired how the supply chain works.
On top of that, taxes make it expensive to stay legal. A 36% consumption tax applies to manufacturing and imports, with an 11% tax applied to wholesale transactions. Between the licensing costs and taxes, a lot of smaller players got squeezed out, and companies consolidated around the big companies. As the licensing rules took full effect from 2022 onward, the top companies controlled over 80% of legal domestic sales.
Exporters got hit as well. Exports had been a lifeline for manufacturers, with export value reaching close to USD 10.6 billion by late 2025. When the government cancelled the VAT export tax rebate in January 2026, Chinese-made hardware got less competitive on price, and some manufactures have started shifting production to places like Indonesia to stay in the game.
Vapes as a complementary device rather than a cigarette replacement
Here is a core issue with vaping in China: it hasn’t really worked as a way to help people quit. It’s more of a side habit for people who still smoke regular cigarettes.
Early evidence of this comes from the China City Adult Tobacco Survey (CCATS), run by researchers from the University of California. It surveyed 31,151 adults across 14 major Chinese cities in 2013-2014 (published in 2019) and found that 93% of users also smoked regular cigarettes at the same time. The survey is over a decade old, but more recent research tells a similar story. A 2023 survey by Peking University researchers covering 4,256 adults aged 18-44 across mainland China found that current smokers were far more likely to vape than non-smokers, reinforcing that vaping still tends to piggyback on smoking rather than to replace it.
That same CCATS survey also found that more than half of e-cigarette users had a college degree, suggesting early adopters tended to be relatively well-off, health-conscious smokers looking for an alternative rather than brand-new nicotine users. It also aligns with more recent findings that brands are largely selling to existing smokers, not converting new ones. According to iiMedia Research’s 2026 consumer survey on China’s vaping market, 76.74% of e-cigarette users still smoke regular cigarettes while only 23.26% use e-cigarettes exclusively. In short, vaping in China still mostly rides alongside traditional smoking rather than replacing it.
Where and why consumers vape
If it’s not really about quitting, when do people reach for a vape instead of a cigarette?
According to iiMedia Research’s 2026 consumer survey, data shows that vapes fill in the moments where a regular cigarette is inconvenient, restricted, or just not the vibe. That’s also why the social side of vaping matters, especially for younger users. For them, a vape is also a fashion accessory, shaped by what looks good and what their friends are using. So brands aren’t necessarily chasing brand-new nicotine users; they’re competing for a slice of existing smokers’ daily habits and social lives.
What happened when flavors got banned
In October 2022, China prohibited all non-tobacco flavors. It hit hard, especially with younger and female users who’d leaned more on flavor variety. Women’s intention to buy vapes dropped more sharply than men’s after the ban. With flavors gone, plenty of people either went back to regular cigarettes or switched to flavored capsule cigarettes, a category that is still legal because it’s sold by the state tobacco monopoly.
How sellers get around the rules online
On platforms like Xiaohongshu, sellers have become creative about staying under the radar. Instead of advertising products outright, they post with coded account handles, drop hints in the comments, and move the actual sale over to private chats on WeChat. The public post is only bait, where real transaction happens somewhere the e-commerce platforms in China can’t catch.
This shows that even though flavored products are technically banned, demand for them hasn’t gone away. It’s just moved underground, onto networks that are much harder to track, which means official retail numbers are probably missing a real chunk of what’s actually being sold.
What actually works on social media
Direct advertisements and health claims don’t get much traction anymore. What works instead is people sharing their own experience: reviews, unboxings, and content with brand-specific hashtags that slip past platform advertising filters. Compliant brands on Xiaohongshu (or RedNote) lean into this by communicating their unflavored products more discreetly and talking about harm reduction instead, a pitch targeting people trying to cut back on regular cigarettes.
Search behavior tells a similar story. Brand names like “elfbar” or “relx” appear relatively freely, but generic vaping-related search terms get filtered much more heavily. Nearly 70% of the content on platforms is just people talking about using the product or directly promoting it, and a lot of it leans on the device looking good, which is rebranding vaping as a lifestyle item rather than a smoking-cessation tool.
Why the hardware has become the main battleground
With flavor off the table, people are judging devices on how well they’re built. According to iiMedia Research’s 2026 consumer survey of Chinese e-cigarette buyers, the biggest factor when choosing a device is the mouthpiece material (42.69%), followed by how easy it is to clean (37.87%) and battery life (37.69%). In other words, brands are now trying to recreate the unique physical feel rather than leaning on flavor.
To justify a higher price tag, top brands are also leaning into a “we’re basically a science company” pitch. RELX, for example, had racked up over 900 patents worldwide by 2025 and has been building out its own bioscience labs and publishing formal ESG reports — moves clearly meant to build consumer trust. On the business side, brands are also prioritizing B2B retail relationships, securing shelf space on the official state trading platform by offering retailers better margins and strong warranties.
How strict regulations reshaped the market but didn’t kill it
- China still makes most of the world’s vapes. Even though the domestic market is tightly controlled now, China, especially Shenzhen and a few other manufacturing hubs, still dominates global production.
- The legal market has fundamentally changed. Flavor bans, licensing rules, and new taxes shrank the market and pushed out smaller players, turning the industry from a land grab into a much more consolidated, compliance-driven business.
- Demand for banned products didn’t disappear. It just went underground onto private channels like WeChat that are much harder for regulars to track.
- Most legal vapers are already smokers. Vaping in China still works mainly as a companion habit to regular cigarettes, not a replacement for them.
- Trust and hardware quality are now the main ways brands compete. With flavors off the table, brands are competing on build quality, manufacturing standards, and credibility instead.
Author: Sory Park, with additional research by Merry
