In the darkness of the Chinese economy, one area of business is booming: cosmetics.
After enduring nearly three years of mandatory masks and frequent lockdowns during the pandemic, many Chinese consumers, wary of big-ticket purchases like apartments, are now splurging on lipstick, perfumes, moisturizers and other personal care products.
But cosmetics companies from France, Japan, South Korea and the United States, which have invested heavily in China, are missing out on much of the action.
As China’s cosmetics companies boom, cosmetics imports are weakening due to regulations the country imposed on foreign manufacturers during the pandemic.
While China’s trade conflicts with the West over semiconductors revolve around national security and technological innovation, the dispute over cosmetics is largely about money.
“I’m not talking about misery,” said Bruno Le Maire, France’s finance minister. “For many French companies,” he added, China “represents between 30 and 35 percent of their total revenue.”
During a visit to China last month, Gina M. Raimondo, U.S. Commerce Secretary, said the United States wanted to expand its exports of personal care products. “No one can argue that health and beauty products interfere with our national security,” she Raimondo said.
Under rules China introduced in 2021, companies must disclose all ingredients in their products and the precise quantities used. They must upload to a Chinese database the addresses of all ingredient suppliers, as well as the location where the ingredients are assembled. Foreign companies fear that disclosing those details could allow low-cost Chinese manufacturers to copy their products.
One of the most controversial Chinese mandates is that many products, such as hair dyes or sun creams, must be tested on live animals before they can be sold to Chinese consumers, a practice that many global cosmetics companies have ended.
“It’s not just the requirements that are onerous, but also the timelines in which things have to be done: they are unrealistically short,” said Gerald Renner, director of technical regulatory affairs at Cosmetics Europe, an industry association.
Large companies like LVMH or L’Oréal have the resources to comply with regulatory demands. But some smaller players are pausing sales to China until there is a less expensive and less time-consuming way to meet requirements.
Led by the French government, the European Union and 11 cosmetics-exporting nations, including the United States and Japan, they are pressuring China this year to repeal many of the requirements. President Emmanuel Macron of France raised the issue with China’s leaders during his visit to the country in April. Le Maire pressed it again when he visited Beijing in July, saying the concerns had been “at the heart of discussions” with his Chinese counterparts.
Le Maire said he and Vice Premier He Lifeng of China had agreed to establish a working group to create common standards that would meet in Paris before the end of this year. But there is no guarantee the talks will resolve the dispute.
China is the second largest beauty market in the world, behind only the United States. However, doing business there has long been difficult for foreign companies.
For decades, China required animal testing for most cosmetics, even those proven safe and sold by brands elsewhere. Brands have quietly tested their products on animals in China or forego imports.
China removed animal testing requirements a decade ago for many products made in China and, in 2021, for imported cosmetics that do not make health claims.
But China still requires animal testing for “specialty cosmetics,” which include products with sunscreen or antiperspirants, as well as products like hair dyes or skin lighteners. According to Jason Baker, senior vice president of PETA Asia, these animal tests include forcing animals to swallow or inhale a test substance or applications to the skin or eyes. The most used are rabbits, guinea pigs and mice.
Michelle Thew, executive director of Cruelty Free International, an advocacy group, added that China tops the list of countries that use animals in testing and research for various purposes (about 20 million animals a year), closely followed by Japan and USA. .
The international beauty and personal care industry supports efforts to reduce animal testing of products sold in China, for both domestic and foreign manufacturers. Unilever, which makes Dove and Vaseline and owns skincare brand Dermalogica, said it had been working with academics and Chinese authorities to phase out the need for imported cosmetics to undergo animal testing.
“The move from animal testing to paper-based risk assessments is certainly positive,” said Carl Westmoreland, director of Unilever’s safety and environmental assurance centre. “There may be more paperwork involved, but we see it as a big step forward.”
The Chinese government’s regulatory agency, the National Medical Products Administration, did not respond to a list of questions faxed on August 8. The Ministry of Foreign Affairs refused to address the issue.
Recent statistics show how quickly foreign cosmetics companies have lost market share to their domestic competitors in China. Retail sales of cosmetics in China in the first half of the year rose 8.7 percent from the first half of 2022. But overall imports fell 13.7 percent.
The difference between increased sales and decreased imports reflected profits for factories in China, many of which are owned by Chinese companies. Hangzhou-based Proya Cosmetics reported a 35 percent increase in sales in the first half of this year compared to a year earlier.
“There is growing acceptance of domestic brands,” said Chris Gao, a China cosmetics analyst at CLSA, a brokerage and investment firm in Hong Kong.
While LVMH and L’Oréal said they were seeing growth in their sales in China, both declined to comment on the decline in imports.
China customs data shows that imports of cosmetics, toiletries and perfumes from France to China, which reached $5.4 billion last year, decreased 6.2 percent in the first half of this year from a year earlier. former. Cosmetics imports from South Korea and the United States decreased by 22.2 percent and 19.8 percent.
An offensive by the authorities against Traders in the Hainan duty free center. It has also impacted sales of beauty products for international companies such as La Prairie and Shiseido. Beyond regulatory bureaucracy, some foreign companies may be importing less because they already have a backlog of products in China.
As China’s duty-free shops struggle with overstocking their shelves, local beauty brands are gaining popularity. According to data from Euromonitor International, a market research company, Chinese-born beauty brands have grown significantly over the past three years, accounting for 27 percent of makeup and skincare retail sales among the top 10 brands. .
And China is expected to continue growing as a market. By 2027, the consulting firm McKinsey EstimatesChina will account for about a sixth of global retail sales of beauty products.
Li you contributed to the research.
