Benefits of regulatory changes in China for the cosmetics industry

While China is lifting the requirement for testing imported cosmetics on animals, there are still certain areas where the procedure will remain mandatory. These situations have been laid out in the two pre-conditions specified in the Provisions for Management of Cosmetic Registration and Notification Dossiers. Fabio Stella of Hawksford explains how these pre-conditions in particular will affect European cosmetics producers.

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After years of negotiations between China’s National Medical Products Administration (NMPA), the Cosmetic Supervision and Administration Regulation (CSAR) and global industry leaders, on 4^th March, Chinese regulators confirmed that imported general cosmetics will be exempt from animal testing from 1^st May 2021.

Two pre-conditions with three exceptions

With the publication of the final version of the Provisions for Management of Cosmetic Registration and Notification Dossiers, China’s NMPA set forth two main pre-conditions for general cosmetics to be exempted from animal testing and three exceptions.[1] Brands wishing to access the Chinese market should both:

• hold a good manufacturing practices (GMP) certificate issued by the relevant authority of the country where the cosmetics are produced; and
• present safety assessment results and testing proving the safety of the use of the cosmetics.

GMP certificates and issuing bodies hurdles

GMP certificates for the cosmetics industry usually describe the basic principles of applying GMP in facilities that produce finished cosmetic products. These guidelines present general processes and the best practices in terms of operators, techniques and organisational factors that may affect the quality of finished goods to be distributed on the market.

Regulatory bodies such as the European Committee for Standardisation, the International Cooperation on Cosmetics Regulation and the United States’ Food and Drug Administration usually approve and recognise the set of standards filed by the International Organization for Standardization and its certifiers, thereby enabling manufacturers to apply one qualification for entrance into several regional and national markets.

The issue with the pre-condition specified in the NMPA’s new regulations lies in the fact that very few national regulatory bodies for cosmetics/medical products actually issue GMP certificates, as these mostly come from cosmetics manufacturers associations or national bodies representing the regulated entities rather than the regulator itself.

First come, first served

Several economies in Europe are better positioned to take advantage of this new development. The French National Agency for the Safety of Medicines and Health Products has already started issuing GMP certificates for manufacturers grouped under the national body, the Federation of Beauty Enterprises, and has launched an online platform to streamline the entire process.

On the other side of the English Channel, the United Kingdom, via the Department of International Trade (DIT), is in discussion with industry leaders and associations to launch a certification system with standards that satisfy the requirements of China’s NMPA. The DIT is also developing a ‘China Ready’ package, which groups market experts, consultants and its Chinese specialists together so as to ensure that the British beauty sector doesn’t miss out on this new opportunity.

The Italian Association of Cosmetics Enterprises is also continuing to follow up on a series of programmes to educate its members about regulatory market updates and export strategies for China. Currently, no government authority or regulator in Italy other than this association is able to certify GMP status for Italian manufacturers.

A common European approach?

Rather than acting on a national basis, European Union (EU) Member States should refer to the EU framework and come up with a mutual solution that brings all the bloc’s major players to an equal starting point. In fact, the EU has already unified a series of best practices and minimum requirements that beauty products have to respect in the Common Market via Regulation CE 1223/2009, which came into force in July 2013 and does mention GMP standards as a benchmark.

In addition, the EU also hosts Cosmetics Europe, the body that first hailed the introduction of GMP standards while trying to improve the quality of the cosmetics industry output via modern production techniques, packaging strategies and new manufacturing processes. If that wasn’t enough, the European Federation for Cosmetic Ingredients has also developed its own GMP standards for its chemical and natural raw materials suppliers for the beauty industry.

Online channels poised to spur growth

Figures by Statista show that the cosmetics market in China totalled Chinese yuan (CNY) 425.6 billion in 2019 before dropping to around CNY 396 billion last year due to the pandemic.[2] However, it is now set to bounce back and recover in 2021, and forecast to a record figure of CNY 455.3 billion. The next five years should bring exponential growth, with China already being the second-largest market in the world for cosmetics products. Around 70 per cent of China’s beauty products sales are already performed online via e-commerce platforms like Tmall, JD.com and their cross-border versions. This is in fact due to the initial regulatory hurdles on animal testing: with cross-border e-commerce, Chinese consumers were able to purchase certain cosmetic products from overseas, with the products classified under CBEC as personal goods. This meant they could skip market-related regulatory requirements, such as animal testing.

South Korea and Japan, the Asian counterparts with historical penetration and influence in the traditional retail sector, have long exploited the admiration of their audiences for eastern beauty standards and the inflow of travellers with higher replacement needs than fashion apparel. During the last Singles Day on Alibaba (11^th November), new local player and Yatsen’s beauty brand Perfect Diary (完美日记) sales hit CNY 100 million in the first nine minutes of a shopping frenzy. This provides a glimpse of the market potential for cosmetics producers and retailers still considering entering the Chinese market.

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Fabio Stella is associate director of sales and business development at Hawksford China. Hawksford has helped many global retail and beauty brands to expand throughout China and Asia. With healthy economies and increasing government incentives for retail growth, Asia remains the centre of the international retail market. We work with an unrivalled number of fashion, luxury and cosmetics brands from all over the world who entirely rely on us to take away the burden of back-office activities such as company incorporation and corporate compliance, management reporting/accounting, tax, payroll and immigration. Our mission is to ensure that brands can focus most of their financial and human resources on their success and expansion in Asia.

[1] For details on the three exceptions, please see the article #BecauseofUs

[2] Cosmetics market size in China from 2012 to 2019 with a forecast until 2021, Statista, 17^th December 2020, viewed 28^th May 2021, <https://www.statista.com/statistics/875794/china-cosmetics-market-size/>