China’s Vaping Queen Chu Lam Yiu's Fortune Go Up In Smoke After Chinese Government Launches Corruption Investigation Against Her

As Chinese authorities launched a corruption investigation against Chinese e-cigarette billionaire Chu Lam Yiu, the shares of her company, Hong Kong-listed Huabao International, tumbled by over 65% on Monday (Jan 24). Huabao shares had made seven-fold gains in the last couple of years.

RLX Technology, the country’s largest e-cigarette brand, also tumbled on signs of an imminent regulatory crackdown.

Chu, who serves as chair and CEO, is currently under investigation for “suspected disciplinary violations” of an unclear nature, the fragrances and tobacco flavoring supplier announced in a Hong Kong stock exchange filing.

Chu, who approximately owns 70% of Huabao International’s shares, is often “China’s vaping queen”. Chu, who played a pivotal role in Huabao International’s entry into the e-cigarette market, is one of China’s richest self-made women with an estimated net worth at $5.8 billion.

Originally intended as a complete substitute for regular cigarettes to help quit people smoking, e-cigarettes were invented by a Chinese pharmacist named Hon Lik in 2003.

E-cigarettes, however, never gained popularity in China, which still consumes the largest amount of tobacco. China is the world’s biggest cigarette producer and consumer, with 300 million smokers who consume 40 per cent of the world’s tobacco. This has prompted Chinese government to a set a 2030 target of cutting smoking prevalence to 20 per cent from the current rate of 26.6 per cent. About half of all Chinese males smoke and there has been a slight rise in the number of young female smokers.

Despite health warnings and ban on sale to minors, there was an increasing trend of China’s youth increasingly taking up vaping of e-cigarettes, partly seen as lifestyle choice. While conventional tobacco is taxed heavily in China, e-cigarettes enjoy a rather friendly 13 percent tax rate.

Across the world, e-cigarettes are no longer seen by health authorities as a substitute that needs to be encouraged.

While the Chinese government enforced online sale ban two years ago, these smokeless devices are still easily accessible and contributing to a worrying trend in adolescent vaping.

In August 2021,state media issued a warning that vaping products do damage to people's health.

The government also issued rules to regulate the production and operation of e-cigarettes, and false advertising problems related to e-cigarettes.