All in one seems to be the appropriate description for a newly-established market regulatory body in China called the State Administration for Market Regulation (SMRA), which includes cosmetics as well as foods and drugs.

As part of China’s new round of structural reform initiated last December, the plan for reforming numerous administrative bodies was unveiled in February. Among the seven newly-created ministries, the new SMRA, which was set up as a direct subordinate body under the State Council in April, becomes the major regulatory agency in China cosmetic market, consolidating the major authorities responsible for market supervision under one administrative umbrella.

As a result, three governmental agencies are absorbed into SMRA, namely China Food and Drug Administration (CFDA), State Administration for Industry and Commerce (SAIC), and General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). And the responsibilities related to market oversight, which was previously split among several other agencies, including National Development and Reform Commission (NDRC), Ministry of Commerce of PRC (MOFCOM) and Anti-Monopoly Committee of the State Council, are also consolidated into SMRA. Furthermore, SMRA now includes the State Intellectual Property Office (SIPO).

All in all, SMRA is the key market supervision and regulatory body in China, overseeing a wide range of activities including commercial registration, product safety and intellectual property rights. More specifically, its responsibilities include consumer and industrial product safety; drug administration; quality inspection, certification and accreditation; market entity registration; commodity prices; anti-monopoly and anti-unfair competition enforcement; commercial bribery; and trademarks and patents infringement. Leading SMRA is Zhang Mao, who previously led the SAIC.

Stifling Innovation
The move is widely regarded as a big attempt by China’s government to simplify administrative procedures and reduce bureaucratic hurdles in order to further promote mass entrepreneurship and innovation. These are essential to promote the sustainable and healthy development of the economy and society, as Premier Li Keqiang pointed out earlier this year during a national conference with regional government officials. He also stressed that there are still loopholes in supervision and public services, which leaves plenty of room for further transforming government functions and increasing administrative efficiency.

What are the implications of the reform? Far-reaching influences are widely expected in the cosmetic industry, and even the massive health care industry.

Despite being the second largest cosmetics market in the world, China faces several serious problems. The current system is widely believed to be unfavorable to new ingredients/products, even those approved by other jurisdictions attempting to enter the Chinese market. As a result, many manufacturers, especially domestic ones, are less interested in R&D innovation and, as a result, few innovative products originate locally.

Under the current regulatory framework, any cosmetic product with a new cosmetic ingredient, which is defined as any natural or manufactured ingredient used in China for the first time, must get approval of the administrative department of public health under the State Council. Since 2004, just 10 new ingredients have been approved, and only four received permission during the 2010-2016, according to the data revealed by the CFDA Evaluation Center’s official site.

All this is about to change. The newly established SMRA, along with a series of regulations and guidelines issued in the past two years, point to a direction of the reform toward stricter, but more efficient, market supervision.

More specifically, two highlights in the reform are of great significance for the cosmetic industry. One, separating operation permit/certificate and business license. Two, further streamlining (administration)/delegating (power), strengthening (regulation) and optimizing (government services), according to the state-run media Xinhua News Agency. These essentially reflect two major policy changes—relaxing premarket approval and widening market access on the one hand, and strengthening the interim and ex-post supervision on the other hand.

For all players in the China cosmetic industry, it means easier access to the market, while greater accountability for any illegal conduct.

So far, perhaps one of most notable examples of market access relaxation is a pilot program jointly implemented by CFDA and AQSIQ on January 17, 2017, a Circular on Pilot Measures Concerning the Record-filing of Non-special-purpose Cosmetic Imports in Shanghai’s Pudong New Pilot Free Trade Zone. Aiming to shift the administrative focus from approval to filing system, the pilot program allows more flexibility for foreign companies to import certain types of cosmetics via Pudong. It is valid from March 1, 2017 to December 21, 2018, and has been further applied to 10 new zones across China, including Tianjin, Liaoning, Zhejiang, Fujian, Henan, Hubei, Guangdong, Chongqing, Sichuan and Shaanxi. 

On the interim/ex-post supervision side, Working Procedures of Cosmetic Risk Assessment was issued on Jan. 9, 2018. The measure further regulates and strengthens the product risk/safety monitoring in the cosmetic market. It has been echoed by tightening post market surveillance since the beginning of the year, expanding the product categories of sun care to anti-hyperpigmentation/whitening/brightening, hair dyeing/coloring and anti-acne.

Another potentially significant movement is a new draft of Rules on Cosmetics Classification publicized on Jan. 17, 2018. Different from the current classification, which divides cosmetic products into two major categories, namely “cosmetics for non-special use(s) (5 subcategories)”and “cosmetics for special use(s) (9 subcategories),”the new draft classification attempts to establish a comprehensive standard for classifying cosmetics in a much more detailed way, based on the effect claims (26), application areas (27), product forms (18) and target groups (7), as well as safety/risk assessment, managed under coding system and open-ended classification form.

The public comment period for the draft closed in January and caused quite a stir among cosmetic companies in China. It is argued that the new standard is too complicated and somehow overlapping, and the potential changes to regulatory requirements might pose great difficulties during the implementation, despite the authority insisting it would improve product traceability and safety by collecting and analyzing more detailed information on products marketed and sold in China.

As reform continues, it is highly likely that the new administrative structures will be used as a basis for further policy changes. As a result, all companies and organizations in the relevant industries, including the cosmetic industry, should monitor future moves by the SMRA. One thing is for sure, the regulations in China cosmetic market will be centering around product safety and supervision efficiency, as pointed out by Zhang Mao during a recent interview.