The Chinese government has tightened control on industrial hemp licenses after recent sharp fluctuations in share prices of publicly traded companies.
China’s National Anti-Drug Committee announced the move in late March, noting the government has yet to approve industrial cannabis for medicine and food additives, according to the China Securities Journal.
The move came as two stocks listed on the Shenzhen Stock Exchange — Shanghai Shunho and Jilin Zixin Pharmaceutical — had been leading several hemp stocks that have skyrocketed this year. Shares in both companies dipped after the government announced the tighter controls.
“Investors should be very careful on these stocks as we don’t know the policies of mainland China, and it is at a preliminary stage,” said Kenny Tang Sing-hing, chief executive of China Hong Kong Capital Asset.
Tang cautioned that the sector remains just a “concept” in Hong Kong, with only a few listed companies related to hemp.
Mainland investors are “very focused on that turf,” Tang said. “It is short term speculative trading.”
Marijuana growth and consumption is illegal in China, but cultivation of hemp is allowed in the southern province of Yunnan and in the northern province of Heilongjiang, which legalised the trade in 2010 and 2017 respectively.
China is the world’s largest hemp producing nation and the biggest global exporter of hemp paper and textiles, but information on the Chinese hemp industry overall can be difficult to come by.