The use of cannabis is deeply rooted in large parts of the Asian region. In China, its use can be traced back to 4,000 BC. Moreover, in many places in Asia, it was and still is an essential part of traditional medicine. The traditional local expertise on cultivation and application has been preserved under the radar of the law enforcement authorities in many areas until today and is being used more widely again in times of liberalization.
Contrary to the prejudice that the Asian region is predominantly conservative about the plant, a closer look reveals a different picture. Pioneers such as Thailand & South Korea show a strong awareness of the overall social and economic potential of the hemp crop, both on the political level and among the population.
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Asia could become the largest cannabis market in the world
According to estimates, the Asian region could become the world’s largest cannabis market in the future, not least because of its enormous population wealth. With gradual liberalization, conservative estimates assume that up to 77 million potential customers could be served in a few years.
However, the volume of the future market is still questionable. Forecasts range from $5.8 billion to $132 billion per year, not including cannabis products! While China mainly focuses on hemp and shows little interest in medical liberalization, with Thailand, South Korea and Hong Kong, there are also progressive players around the legalization of medical cannabis. India, Nepal, Malaysia, the Philippines, Japan and Cambodia are also on the starting blocks to take advantage of the recorded turnaround in global public opinion.
China – the hemp giant
After the cultivation of commercial cannabis was made possible again in 2010 in the Middle Kingdom, currently the market is in full development. With revenues of almost $1.2 billion (2019) from the sale of hemp and hemp products, and cultivation areas of over 33,000 hectares, which is equal to about half of the world’s cultivation, China already covers one third of the world cannabis market.
The Hemp Business Journal estimated that China could reach a market volume of $1.5 billion as early as 2020. The use of hemp for industry and textiles in cosmetics, food supplements and TCM is permitted. In addition, China is the world champion in patents: With 309 out of 606, the country holds more than half of all worldwide patents concerning processing methods, machines and products made of and for hemp. However, China still seems far away from a liberalization of THC-containing cannabis for medical purposes or even recreational use.
Focus on textiles and CBD exports
Instead, the Middle Kingdom focuses strongly on the production of hemp textiles and CBD as an export product for the international market. Two-thirds of the hemp produced in the country are currently used for the production of hemp textiles and find their biggest customers in Italy, Germany, and South Korea. In the country, the Chinese People’s Liberation Army, among others, enjoys hemp textiles – in the form of towels, socks, and underwear.
With regard to CBD, China is taking an extraordinary path. While cannabis containing THC is still strictly forbidden, in 2017 the first permits for the extraction and processing of CBD were granted as long as the THC content of the cultivated hemp is below 0.3 %. To date, however, this is only possible in a few provinces. Within the national borders, the use for research purposes and the sale of CBD-containing cosmetics made from the extract of hemp leaves is permitted.
The focus, however, is on export, with which China is responding to the rapidly increasing global demand. As early as 2017, CBD sales amounted to around $53 million and are expected to increase to over $228 million in 2020. Mainly South Korea, Japan, the EU and the USA are served, which generate the highest demand for CBD products due to their strongly growing wellness and cosmetics markets. Although the current regulations still hinder the development of the domestic market, some sources assume a gradual liberalization around CBD in China in the near future. This could give a further boost to the Chinese hemp industry and put further pressure on global producers due to its sheer scale.
How is the quality of hemp produced by China?
While China can thus already be regarded as a superpower of hemp in quantitative terms, there are still some questions regarding its long-term development. Although hemp as a widespread raw material in the textile industry would be very welcome in principle in view of its sustainability potential through soil cleaning and high storage capacity of CO2, the heavy use of chemicals in processing often negates the advantages mentioned above.
While more sustainable alternatives are being developed worldwide, it is questionable whether these new, expensive technologies can be combined with the Chinese strategy of hemp as a mass product. China also has to struggle with the problem of heavy metal contaminated soils when it comes to the quality of CBD products. Decades of industrialization have left their mark and it remains to be seen which quality assurance measures will ensure that products meet international standards across the board in the future. While the country can thus position itself strongly through quantity, there will continue to be opportunities for producers in the western world to differentiate themselves through qualitative aspects in the foreseeable future.
In the last year, medical cannabis, in addition to hemp, has increasingly come into the focus of Asian countries
At the end of 2018 Thailand decided, as the first Southeast Asian country after more than 80 years of prohibition, to legalize medical cannabis and further liberalize the use of cannabis. With this decision, the country hopes to achieve a certain hegemonic position in the Asian region in the future. Its outstanding cultivation conditions and central position in the ASEAN zone make Thailand a benchmark for the Asian legalization movement.
Thailand’s model serves as a possible model for surrounding countries such as Malaysia and Cambodia. This could mean that the Asian continent may choose a model of legalization that diverges to some extent from the Western approach, since the Thai model, unlike the European model, is characterized by strong protectionism, export focus, and reference to traditional expertise.
Cannabis between medicine and tradition
Thailand, like other countries in the region, has extensive expertise in the cultivation of cannabis. As a traditional remedy, it has been used in Traditional Thai Medicine (TTM) for centuries for migraine, menstrual cramps, asthma and sleep disorders. Its use is so deeply rooted in society that even draconian punishments could never really displace the medicinal plant. The black market, where flowers are available for recreational use but mainly for the production of medicinal oils, is flourishing and several tons of illegal cannabis are confiscated annually. In the first phase of legalization, this was used to obtain medicinal cannabis extracts.
The existing experience from the TTM is now to be gradually institutionalized. This is shown, among other things, by the unorthodox step of the government to release more than a dozen traditional prescriptions with cannabis as an ingredient for use in patients. In addition, besides classical physicians and so-called “cannabis clinics”, trained traditional healers with appropriate further training are also allowed to prescribe cannabis.
Currently, cannabis is already allowed to be used for the treatment of 38 different complaints such as epilepsy, multiple sclerosis, sleep disorders or depression. In the medium term, approximately 13 million potential patients within Thailand could benefit from the treatments. Among other things, because the country is confronted with a rapidly increasing growth of the older population. More than 30,000 people had already registered online for cannabis treatment. The domestic cannabis market potential away from exports is large. According to projections by Cannabis Catalysts, it could be as much as $46 to $388 million annually by 2024 – depending on prescription practice.
Cornerstones of the model
Legalization, however, is characterized by strong control by state authorities and protectionism. To date, only public institutions or institutions close to the state are permitted to apply for the various licenses required. To date, 470 licenses for the sale of medical cannabis have already been issued – hundreds of further applications are in process. However, with 18 existing licenses for cultivation and 20 licenses for extraction purely in public hands, production is still in its infancy.
The credo in Thailand is that the needs of the Thai population and the development of a competitive domestic industry are paramount before the market is fully opened. A five-year far-reaching import ban is to prevent large pharmaceutical and cannabis companies from China, Japan or the USA from dominating the Thai market. That is because foreign companies are very interested in Thailand, partly because of its position as the gateway to the Southeast Asian market. The country also has high hopes for the development of medical cannabis preparations in order to alleviate the strong dependence on the import of pharmaceutical products. In concrete terms, this means that the free market is currently still subject to severe restrictions. Private companies have to collaborate with governmental or semi-governmental organizations to gain access to licenses. In addition, two-thirds of them must be in Thai hands.
In the future, Thailand is also expected to focus strongly on exports. Thailand is relying on its comparatively good reputation in the international market and its export strength, because some of the most important export destinations in Thailand have already legalized medical cannabis. Away from the local market, this could generate an additional USD 600 million in added value annually.
While China is focusing on quantity, Thailand is aware that a purely price-oriented approach to medical cannabis products and the CBD sector is not sufficient to survive in the international market in the long run. Therefore, the focus from the very beginning is on the integration of educational and research institutions and industry. This is intended to raise both product quality and product development to international level as quickly as possible. The first public-private collaborations, such as the University of Phayao, are underway.
In the north of the country, Apinya Medical Co, Ltd, an Austrian-Thai joint venture, is already focusing on the integration of European know-how and standards on site. But also in the agricultural sector, a closer look reveals small farmer collectives which cultivate plant raw materials according to European organic standards and for the European market. If these potentials are properly used in the expansion of cannabis cultivation, Thailand could well position itself as a strong, qualitatively competitive player in the global cannabis market.
Even if the Asian cannabis and hemp landscape seems to be very heterogeneous at the moment, with the slow “awakening” of the region, new, serious players are appearing on the global cannabis and hemp market. For European companies, it is now important to recognize and take advantage of the opportunities that arise early enough.
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First published in HANF MAGAZIN, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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