BEIJING – In the gloom of China’s economy, one area of business is booming: cosmetics. After enduring nearly three years of mandatory masks and frequent lockdowns during the Covid-19 pandemic, many Chinese consumers, wary of big-ticket purchases like apartments, are now splurging on lipstick, perfume, moisturisers 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 a lot of the action.
As China’s cosmetics companies are booming, imports of cosmetics are wilting under regulations that the country imposed on foreign manufacturers during the pandemic.
While China’s trade conflicts with the West over semiconductors pivot on national security and technological innovation, the dispute over cosmetics is largely about money.
“I’m not talking about peanuts,” said Mr Bruno Le Maire, France’s Finance Minister. “For many French companies,” he added, China “represents between 30 and 35 per cent of their total revenues”.
During a visit to China in August, Ms Gina Raimondo, the US commerce secretary, said the US wanted to expand its exports of personal care products. “No one can argue that health and beauty aids interfere in our national security,” she said.
Under rules that China introduced in 2021, companies must divulge every ingredient in their products and the precise quantities used. They must upload to a Chinese database the addresses of all ingredient suppliers as well as where the ingredients are assembled. Foreign companies fear that divulging those details could allow low-cost Chinese manufacturers to copy their products.
One of the most contested 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 stopped.
“It’s not only the requirements that are onerous but the timelines under which things need to be done – they are unrealistically short,” said Mr Gerald Renner, the director of technical regulatory affairs at Cosmetics Europe, an industry association.
Big companies such as LVMH or L’Oréal have the resources to meet the regulatory demands. But some smaller players are pausing sales to China until there is a less time intensive and expensive way to meet the requirements.
Led by the French government, the European Union and 11 cosmetics-exporting nations, including the US and Japan, are pushing China in 2023 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. Mr Le Maire pressed it again when he visited Beijing in July, saying the concerns had been “at the core of discussions” with his Chinese counterparts.
Mr Le Maire said he and Vice-Premier He Lifeng of China had agreed to set up a working group to create common standards that would meet in Paris before the end of 2023. But there is no guarantee that talks will resolve the dispute.
China is the second-largest beauty market in the world, trailing only the US. Yet doing business there has long been difficult for foreign companies.
For decades, China mandated animal tests for most cosmetics, even for those that had been proven safe and sold by brands elsewhere. Brands either quietly tested their products on animals in China or gave up on their imports.