Regulations Impacting Natural Products in ChinaRegulations Impacting Natural Products in China

The Chinese economy is a true behemoth with an estimated $7.5 billion generated annually on dietary supplements and ingredients. The past five years have seen a dichotomy of favor develop around Chinese goods and services. A huge acceleration in economic demand for Chinese manufacturing was apparent; however, recent issues have raised concerns about safety and standards. Understanding the Chinese dietary supplement and food regulatory system can help companies navigate the country’s evolving natural products market.

The Chinese system of regulatory control in relation to foods, beverages, supplements and ingredients (FBSI) is no doubt complex. At present there are three main agencies that regulate the sale, manufacture and advertising of FBSI: the State Food and Drug Administration (SFDA), the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), and the Ministry of Health (MOH).

The SFDA regulates structure/function and health claims on dietary supplements and, in co-operation with the State Administration for Industry and Commerce (SAIC), oversees and governs the approval of advertising. This agency also handles GMP (good manufacturing practice) authentication of dietary supplement and raw ingredient facilities. SFDA and its branches examine dietary supplement advertisements before they are released. According to the Provisional Regulation on Health Food Advertising Examination, SFDA can stop any exaggerated dietary supplement advertising and punish those infringing the law through fines. According to the Regulation on Nutritional Supplement Claim and Examination, this agency can also kill any misleading claims that are not substantiated, claims to cure or treat disease, or are not within the 27 health functions/claims (i.e., “lower blood pressure”). The MOH classified the “health functions” of nutritional health products via the Food Hygiene Law of the People’s Republic of China and Health Food Administration Act. In 2005, SFDA took over the business of health food claim examination from MOH; however, the functions have not changed.

The second main agency is the AQSIQ, which controls the quality, safety, import and export of dietary supplements and raw ingredients. AQSIQ played a key role in cooperation with the U.S. FDA and U.S. Congressional delegation in addressing the food safety issues facing the country in 2007. By enforcing the Food Hygiene Law and Quality Law of the People’s Republic of China, this agency can inspect any manufacturer’s facility of dietary supplements or raw ingredients. According to the Standardization Law of the People’s Republic of China, trade associations such as the China Health Care Association or the China Chamber of Commerce for Import & Export of Medicines & Health Products have the responsibility to develop manufacturing and quality standards for dietary supplements or raw ingredients. Following their development, the standards are submitted to AQSIQ as a guideline for enforcement. According to Law of the People’s Republic of China on Import and Export Commodity, AQSIQ can also inspect and quarantine any dietary supplement or raw ingredient for import and export purpose.

Finally, the MOH controls issues surrounding food sanitation licensure and enforces food sanitation relating to dietary supplements and raw ingredient manufacturers’ facilities. The MOH recently released regulations on the Food Nutrition Fact Labeling Administration, which will be enforced starting May 1, 2008. This regulation requires food manufacturers to tell consumers the nutritional facts, claims and ingredient functions regarding each product clearly and objectively.

Although these agencies have specific roles, there is also interplay between them. For example, many imported health foods or dietary supplements are registered as foods in China as it is cheaper ($28,000 per year) and more expedient than registering dietary supplements or functional foods (up to $42,000 per year) via SFDA. Additionally, the examination for a dietary supplement license is very strict, with the need for animal testing on any final products. However, importers of finished goods would not go through SFDA for function product claims but rather AQSIQ for Food Labeling Authentication, and then the MOH for Food Sanitation License prior to any marketing throughout China. AQSIQ would continue to enforce Food Labeling Authentication via Regulation on Food Labeling Administration.

Raw ingredient producers generally register their businesses as pharmaceutical companies in China. SFDA controls the issue of pharmaceutical production license via the Pharmaceutical Production Administration Act, which means most companies first register their business at SFDA before SAIC. SFDA also regulates all food, drugs and cosmetics. Although SFDA plays an important role, it does not regulate the whole supply chain from start to end. Agencies such as AQSIQ, SAIC, MOH and the Ministry of Commerce (MOC) also participate in the administration and take control of the regulations they are charged to enforce. SAIC also governs the marketing activities of any end-products within the market, and helps combat fake and illegal products in a bid to protect consumers. Interestingly, the MOC is an entity that controls the issue of direct selling of nutritional products. Its remit is different from those granted through Pharmaceutical Production Licenses from SFDA as licenses granted from the MOC are for direct sale only and not through natural health stores or other traditional retail outlets.

Inside Tradition

There is no real working definition for dietary supplements from the Chinese market. However, there has been a definition for health foods encompassing dietary supplements and functional foods fortified with such nutrients as vitamin, minerals, coenzyme Q10 (CoQ10), herbs and Traditional Chinese Medicine (TCM).

The TCM market is well regulated and defined; however, as with many countries, it is more of an issue of enforcement. The TCM decree, or “regulations on the protection of types of traditional medicine,” was brought into effect within the People’s Republic of China on Jan. 1, 1993. The decree outlines 27 individual articles split over five chapters covering issues related to TCMs produced and manufactured within China. The articles provide direction on the registration of TCM and the protection the Chinese administrative department of Public Health under the State Council can grant. In brief, if an application on a TCM is approved, the State Council can issue a “Certificate of Protection of Types of Traditional Chinese Medicine”. The decision of approval is made by appointed experts in the medical service, scientific research, inspection, trading and management of TCM. This certificate can provide two types/classes of protections—first and second class—dependent on six conditions.

First class protection conditions include: having special curative effects for a certain disease; artificial medicines prepared from varieties of wild medicinal materials analogously under first class protection; or used for the prevention and cure of special diseases.

Second class protection is applicable for products that meet the following criteria: conform to the provisions of Article 6 in these regulations, or having once listed under first class protection but now being cancelled; having outstanding curative effects for a certain disease; or effective substances and special preparations extracted from natural medicinal materials.

The period of first class protection is for 30, 20 or 10 years and second class is for seven years. The protection granted provides the prescription and pharmaceutical techniques shall be kept secret and not published. These regulations are in some ways like the article 13.5 claims available through the EU system, although the protection period extends beyond the five years of 13.5 claim approvals. There are some caveats to the granting of a certificate of protection, such as where a TCM may be required in a clinical (hospital) environment. If a TCM used for the treatment and cure of disease is in short supply, under article 19 (Chapter 4) of the regulation, the province with the shortfall may utilize a similar TCM including its pharmaceutical techniques and manufacturing, even if it has first class protection certificate.

Today’s Market

Over the past year, the biggest issues for Chinese health food industry have been combating corruption, reinforcing government administration, and ensuring quality and safety. Many SFDA high officials faced charges in 2007 due to corruption related to GMP authentication, drugs and health foods claim examination. The Chinese government reformed and re-structured SFDA, and many drugs and health foods were required to resubmit health/product claims. Many facilities were also required to resubmit evidence for GMP authentication. Following recent government reform talks, it appears likely the Chinese government will merge the MOH and SFDA.

For a long time, food, drug, dietary supplement and cosmetic administration has been a complicated issue in China. Several agencies were involved; however, poor administrative efficiency led to significant consumer unrest and mistrust, which has required restructuring and reform by the Chinese government.

The government evidently reinforced the administration on health food (including dietary supplement, functional food and cosmetic) advertising through the MOH and SFDA. The situation that functional food advertising can be released without any authority examination has significantly changed. Any health food advertising that want to be released should pass the provincial-level SFDA examination.

The examination scope includes: 1) words or expressions in the advertising that could cause consumers to mistake it for a drug or pharmaceutical; 2) words or artistic expressions in the advertising that directly or indirectly claim therapeutic functions; 3) words or expressions in the advertising that cite medical institutes, hospitals, doctors as substantiation; and/or 4) advertising content exceeding the functions and scope that MOH and SFDA had defined.

Andrew Liu, founder and chief consultant, Flacious Consulting Ltd. (China), noted, “Already these changes have reduced a significant number of legal advertisements as well as the re-writing of brochures and product labels. ... This change in stance by the Chinese government will help win back the consumer confidence and trust on health food and to ensure this industry to development towards the right direction.”

The Chinese market, already estimated at more than $30 trillion, is an exciting opportunity for both importers and exporters. As 2008 plays out, the Western market will refocus on the East and, in particular, a renewed China with tighter GMPs, HACCP and strong affiliations with U.S. and European standards organizations. While there is some continued thought that issues of quality are a Chinese problem, it is important to realize in an expanding global marketplace with tighter margins, attainment of high quality materials from China is a global issue that will require shared insights if the market is to thrive

Mark J. Tallon, Ph.D., is chief science officer of NutriSciences Inc., a London-based consultancy firm specializing in global health claim substantiation, product development and technical writing. For more information, visit NutriSciences.net.