In the midst of China’s struggling economy, one industry is thriving: cosmetics. After enduring years of mask-wearing and lockdowns during the pandemic, Chinese consumers are now shifting their focus to personal care products like lipstick, perfume, and moisturizers, instead of big-ticket purchases like apartments. However, cosmetics companies from France, Japan, South Korea, and the United States, who have heavily invested in China, are missing out on this boom.
China has imposed strict regulations on foreign manufacturers, causing imports of cosmetics to decline. Amidst trade conflicts with the West, the dispute over cosmetics is primarily about money, rather than national security or technological innovation. These regulations require companies to disclose every ingredient in their products, along with the specific quantities used, and upload this information to a Chinese database. Foreign companies fear that this will allow low-cost Chinese manufacturers to copy their products.
Additionally, Chinese mandates dictate that certain products must be tested on live animals before being sold, a practice that many global cosmetics companies have ceased. The timeline and demands of these regulations are onerous and unrealistic, making it difficult for smaller players to meet the requirements. Major companies like LVMH and L’Oréal can comply, but smaller brands are opting to pause sales until a more feasible solution is found.
In an effort to address these challenges, the French government, along with the European Union and other cosmetics-exporting nations, such as the United States and Japan, are urging China to repeal many of these requirements. Talks are underway to establish common standards, with a working group set to meet in Paris later this year. However, a resolution is not guaranteed.
China is the second-largest beauty market globally, after the United States, but has always been a challenging environment for foreign companies. Animal testing has been mandatory for most cosmetics in China, even for products already proven safe in other countries. Although China dropped certain requirements a decade ago, animal testing is still required for “special cosmetics” like hair dye or sunscreen. China is the leading country in animal testing and research, using approximately 20 million animals annually.
Efforts are being made by the international beauty and personal care industry to reduce animal testing for cosmetics sold in China. Companies like Unilever are working with academics and Chinese authorities to phase out animal testing for imported cosmetics. This shift towards paper-based risk assessments is seen as a positive step forward.
Statistics show that foreign cosmetics companies have lost market share to domestic competitors in China, with imports declining while domestic sales grow. The rising popularity of domestic brands is contributing to this shift. While major companies like LVMH and L’Oréal are experiencing growth in China, they have declined to comment on the decrease in imports.
Overall, the regulatory hurdles and increasing preference for domestic brands have impacted the cosmetics industry in China, causing foreign imports to decline. However, China remains a growing market, with projected growth in beauty retail sales. It is estimated that by 2027, China will account for approximately one-sixth of global beauty retail sales.
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