By Daniel Kruse • In the many years I’ve been observing the Chinese hemp market, there’s never been a more exciting moment than now, as the pieces come together that can shape China into the world’s leading producer. And it’s not only about textiles, as commonly thought. Here are 6 Key Drivers that will shape China’s hemp industry over the next decade.
Before a long decline of the Chinese hemp industry that began in the 18th century and continued until the end of the 20th, China was the world’s epicenter of hemp, which some experts say dates to circa 2,800 B.C. when hemp strands started to be twisted into rope. And while the industry shrank drastically as worldwide demand trailed off last century, hemp has always been a part of the Chinese culture, most commonly associated with the textile sector. In other words, the Chinese know hemp because they’ve grown it and fashioned it into end products throughout the millennia.
Market & Economics
China is vast, and generally considered to have the biggest hemp growing fields of any contiguous market in the world. In one province alone, Heilongjiang, more than 74,000 acres of hemp are being harvested this year – nearly as much as Europe’s 2016 crop of 81,500 acres (33,000 hectares), and more than twice that grown in Canada (31,000 acres, 2016). Province officials say they’ll double the acreage next year – and that is only one province!
Looking well into the future, Chinese authorities earlier this decade rolled out a great plan to plant hemp on 1,333,333 ha. to produce 2,000,000 tons of fibres – and that’s only to feed the country’s textile mills. Expect textile exports to continue to dominate the hemp industry in China, which in recent years has been exporting about 2 million meters of hemp textiles annually.
Aside from a massive domestic market, China is geographically positioned to take advantage of the nearby export markets of Japan, Korea, India and Australia, where demand grows for other hemp products such as cosmetics and food.
The Chinese see hemp as a rational replacement for the country’s cotton growing and processing industry as it addresses the environmental impact of cotton — water shortages, soil salinization and pollution from pesticides. As Chinese cotton grows less and less competitive worldwide, the Chinese see hemp as a logical, environmentally friendly substitute.
To advance the transition, new processing technology and methods are being developed to gain fine hemp fibres. Chinese experts have worked out a process using enzymes in the development of those fibers that makes them suitable for processing by the country’s vast cotton processing infrastructure to produce pure hemp fabric and blends – all the while going easy on the environment.
Chinese hemp stakeholders are also looking at expanded use of the plant by moving into such sectors as food, hemp oils, bio-plastics and medicine.
Hemp food and feed products are important markets in China as well as in western countries. Hemp seeds are the initial raw material for a broad range of hemp foods, such as hemp oil or hemp protein. From a nutritional-physiological perspective, hemp food products are immensely valuable. Hemp is rich in polyunsaturated fats and, above all, contains the perfect ratio of omega 6 to omega 3 (3:1). This makes hemp foods, and especially hemp oil, an outstanding alternative omega source for vegetarians and vegans – markets that are expanding the world over.
The Chinese also see a fast-growing market in hemp oil-based cosmetics. Valuable skin caring substances in hemp oil make it an ideal, natural ingredient in a wide variety of excellent cosmetic products – cremes, body lotions, bubble baths, shower gels and massage oils.
And they’ve noticed the small but growing potential in hemp-fibre-based composites such as plastic and fibreglass, applications which are being explored in the auto and construction industries. The Chinese are already using a rougher variant of the hemp fibre to produce lightweight pre-formed doors and shelves.
Finally, as CBD gains importance in both the domestic and global health-care markets, the number of Chinese companies extracting CBD from leaves and blossom grows continuously. As THC becomes legal in a growing number of countries, the Chinese are also well positioned as medical cannabis markets expand all over the world.
Research & Development
At the same time Heilongjian Province vastly ramped up its hemp farming this year, industry stakeholders intensified their research and development as they continue to refine ways to produce fibres for the textile sector. But researchers in Heilongjian are also looking into applications for foods and pharmaceuticals. It is exciting to see the Heilongjian Province, long considered the cradle of Chinese hemp, going back to its hemp roots again.
With labor costs rising, the Chinese realize they need to develop more efficient machines to replace hand sowing and harvesting and to speed up the decortication processes, which now are slow and wasteful. To address those needs Universities from Heilongjiang Province, Ukraine and Canada are conducting comprehensive research to develop new hemp varieties, more versatile and efficient harvesters and new technologies to generate fine hemp fibres, seeds and flowers.
Adding to those challenges is the need to develop cultivars and cultivation practices that maximize yields across the vast country’s various climatic and soil regions. More high-quality, high-efficiency hemp strains need to be developed and introduced into the market in an improved and expanded lineup of seed varieties.
Meanwhile, Chinese firms and individuals have secured some 500 patents related to hemp including those for the plant itself, processing, textiles, food, oil, paper manufacturing and medicine, among others. That’s well over half all patents for hemp registered worldwide – a clear indicator that forward-thinking firms see hemp’s potential in China and around the world.
Strong investor interest
All this has attracted the attention of investors who are welcomed by Chinese stakeholders. At this year’s International Conference on Hemp Industry in Harbin, more than 300 delegates from China, Australia, Europe and Canada presented success stories from all over the world and discussed future production and marketing strategies for even more and better hemp products. The conference brightly showcased the importance and versatility of the environmentally friendly hemp plant.
Heilonjiang Province particularly is on the right track as it goes about a search for partners in Europe and North America – with wide potential for various forms of cooperation. The province has the resources to start an up-to-date hemp industry and offers subsidies as well as an outstanding infrastructure.
For the investor, it’s important to note that Chinese regulations differentiate marijuana and industrial hemp directly in the field by the scientific distinguishing criterion of 0,3% THC*. That’s important because as China begins to meet the demand for hemp products it can push the establishment of the 0.3% or higher THC levels in Europe and other markets around the world.
* Small, E. & Cronquist, A. 1976. A Practical and Natural Taxonomy for Cannabis.
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The Founder of both Hempro Int. GmbH & Co, KG, and and HempConsult GmbH, Daniel Kruse has been in the hemp industry since 1995. Hempro Int. is a vertically integrated Dusseldorf-based producer and wholesaler of hemp foods, bulk raw materials for food, textiles, accessories and cosmetics. Daniel is a senior advisor to entrepreneurs, startups, investors and other industry stakeholders through HempConsult GmbH, an independent consulting firm. He has a background in banking and studied in the USA and Germany. He is also a member of the board of directors at the European Industrial Hemp Association. Daniel was a keynote speaker at the recent Harbin International Conference on the Hemp Industry.