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As Trade War Tensions Heighten, China’s Role in Global Cannabis Industry Increases

China Expands Involvement in Global Cannabis Industry
Photo Gracie Malley for Cannabis Now


As Trade War Tensions Heighten, China’s Role in Global Cannabis Industry Increases

The global cannabis industry is increasingly dependent on factories in China’s industrial zones and is facing ramifications from Trump’s trade war with Beijing. Meanwhile, Chinese pharmaceutical firms are exploring potential applications of cannabis and possession of herbaceous cannabis still brings the death penalty.

Corporate globalization has influenced the cannabis business as much as any other industry. U.S.-based cannabis companies are now looking to low-cost labor in China to handle aspects of production that do not directly involve contact with the plant, but this economic relationship is facing stress as tensions increase between America and China.

Over the past few months, since President Donald Trump levied new tariffs on Chinese steel and aluminum in April, cannabis industry leaders have expressed fears of being hurt by President Trump’s trade war with Beijing. Those fears were given yet greater urgency by this week’s news that Trump plans to impose 10 percent tariffs on a further $200 billion worth of Chinese imports.

CNBC reports that Trump threatened in his statement announcing the move that “if China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.”

Back in July, Gregg Gorski, general manager of Smokebuddy, told Cannabis Now that the new tariffs on Chinese goods were hurting the cannabis company’s margins.

“Our costs went up by 25 percent,” Gorski said. “So we have to add another 25 percent to our price when we sell to our distributors. So they have to raise the price when they sell to the store, and the store has to raise the price when it sells to the end-buyer. We can’t eat the increase because we were already running on a 30 percent margin. So the increase would eat into our bottom line.”

KushCo Opens Office in China

In the face of rising tensions, some cannabis companies are taking new strides to conduct business in China.

The latest cannabis-industry player to seek opportunities in China is KushCo Holdings of Garden Grove, California. KushCo just announced it would open an office in China to seek production facilities there for child-proof packaging for cannabis products.

“We continue to invest in stateside production but also recognize that strong relationships and serious investments in China are extremely important for any robust supply to function efficiently,” CEO Nick Kovacevich told Proactive Investors.

KushCo is the corporate parent for companies including Kush Bottles and Koleto Packaging Solutions that serve the legal cannabis and medical marijuana industries.

The office will be located in the Jiangbei district of Ningbo, a major port and industrial hub in Zhejiang province.

China Still Executing People for Cannabis Possession

But there’s a certain grim irony here. Just as KushCo made its announcement, the Australian Broadcasting Corporation released a harrowing mobile phone video of an execution that took place somewhere in northern China. In the video, a man is taken into a field, flanked by dozens of security officers. He is forced to kneel and then shot in the back of the head.

The account paints a disturbing picture. The death penalty is mostly imposed for murder and drug offenses, including for cannabis. Convictions are usually secured through a confession, not evidence — and that confession is often extracted under torture, according to various human rights monitors. An intimidating 99 percent of cases result in convictions.

Executions in China are classified as state secrets. The names of those put to death are not released, so often families only find out after the execution has taken place. Also quoted in the Australian Broadcasting report was Zhen Lin, one of the few activists inside China publicly advocating against the executions, with an organization founded by dissident lawyers called China Against the Death Penalty.

“Our estimate, sourced from court judgment documents and related media reports, says 2,000 [people] were given the death penalty in the last year,” she said. “And that is a very conservative estimate.”

The situation has actually improved compared to a decade ago, when there were an estimated 10,000 people executed annually. Due to legal reforms, there is now greater judicial review for death-penalty cases, and the number of capital offenses has been reduced. But drug offenses remain on the list. “Thirteen types of crimes for the death sentence have been abolished, but China still has 46 types of crimes for capital punishment,” Zhen Lin said. “We are pushing for non-violent crimes and drug-related crimes to be excluded too.”

Back in April, Amnesty International issued its annual report on executions around the world, reporting the welcome news that they had dropped to 993 in 2017 from a 2015 peak of over 1,600. But the figure doesn’t even include China, where the number of executions is not disclosed. Amnesty believes that China carries out more executions than the rest of the world combined.

In its report the previous year, Amnesty called on China to “come clean” about its “grotesque” level of capital punishment.

And executions for drug offenses seem to be rising. Last December, The Guardian reported that authorities kicked off a new anti-drug campaign with grisly public spectacles in which suspects received summary “trials” before assembled onlookers at a stadium in the southern city of Lufang — and were promptly taken off to be shot. (The good news is that there was much outrage over this on Sina Weibo, China’s social media network, according to the BBC News.)

And while most drug-related executions seem to be for methamphetamine, you can still be shot for cannabis possession, in quantities deemed to indicate trafficking. According to a report in Hong Kong’s South China Morning Post last August, the quantities sufficient to land you before a firing squad are 10 kilograms of resin (hashish) or 150 kilograms of herbaceous cannabis.

An Intolerant ‘Cannabis Superpower’?

In an absurd contradiction, the South China Morning Post headline refers to China as the world’s emerging “cannabis superpower.” The People’s Republic is the planet’s top hemp producer and a growing proportion of its massive yield is going to medicinal rather than the old industrial purposes. And not only for export — Chinese companies are now exploring the age-old use of cannabis in traditional Chinese herbal medicine to develop new patented products.

The Beijing-based Hemp Investment Group told the South Chian Morning Post that it had partnered with the People’s Liberation Army to develop a CBD-based product to treat post-traumatic stress disorder.

“We expect the sector will grow into a 100 billion yuan industry for China in five years’ time,” said HIG president Tan Xin.

In the most recent development, South China Morning Post reported in February that Hong Kong-based pharmaceutical company Meilleure Health International Industry Group has entered into a partnership with HIG to provide cannabis for development of new medicines.

So, while the United States and China retaliate back and forth with increasing tariffs, China is poised to become a major player in the cannabis industry — while its citizens can still get the firing squad for possessing large amounts of herbaceous cannabis.

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