China's New Plan to Fix Supply Chains

The latest five-year plan is part of a broader "Made in China 2025" strategy, which aims to shift the country from a low-cost manufacturer to a high-tech powerhouse. For beauty and wellness, this means a significant push to increase the self-sufficiency rate of cosmetic ingredients to 50% by 2028, fostering a domestic raw material innovation market. This initiative is driven by the fact that approximately 80% of core cosmetic ingredients used in China are currently imported from Europe, the U.S., Japan, and South Korea. The National Medical Products Administration (NMPA) is a key agency driving this change, implementing regulations to support domestic innovation. The NMPA has introduced a "dual-track" green channel to speed up the review and approval process for new cosmetic ingredients developed in China. This is part of a larger effort to build a fully integrated innovation chain, from research and development to market application, reducing reliance on foreign technology. This strategic shift is underpinned by the "dual circulation" strategy, which prioritizes strengthening China's domestic market and consumption. While international trade remains important, the focus is on creating a more resilient domestic supply chain, insulated from external risks and geopolitical tensions. This could lead to increased competition for raw materials as domestic demand is prioritized. China is a major global supplier of key cosmetic ingredients, including surfactants, emollients, preservatives, and natural extracts like ginseng and green tea. The country is also a growing force in biotech ingredients such as recombinant collagen and peptides. However, supply chain disruptions have already impacted the industry. For example, the local brand ZhiBen experienced stock shortages of its popular cleansing balm due to delays in customs clearance for imported ingredients. Similarly, Estée Lauder faced production delays due to its reliance on a single Chinese manufacturer affected by labor shortages. Price volatility for raw materials sourced from China is another critical factor. The price of Sodium Laureth Sulfate (SLES), a common surfactant, has seen significant fluctuations due to the rising costs of its base components, which are sensitive to geopolitical events and supply-demand imbalances. Trade tensions and tariffs between China and the U.S. have also contributed to increased production and procurement costs for cosmetic ingredients. The Chinese government is also leveraging its regulatory framework to encourage domestic R&D. Since May 2021, imported general cosmetics can be exempt from mandatory animal testing, opening the market to more international brands. However, all cosmetic raw materials now require safety data submission to the NMPA, increasing traceability and compliance requirements for both domestic and international companies. Looking ahead, the development of "Raw Material Innovation Industrial Parks" in key economic hubs like the Guangdong-Hong Kong-Macao Greater Bay Area and the Yangtze River Delta is expected to accelerate domestic production. These parks will offer tax incentives and streamlined import procedures for specialized equipment, further bolstering China's capabilities in cosmetic ingredient manufacturing. The government's plan also includes a focus on "AI + Beauty" integration, with artificial intelligence identified as a strategic growth pillar in the 14th Five-Year Plan. The NMPA has even issued guidelines for AI technology services in cosmetics. This push towards technology-driven product development and personalization is likely to further shape the competitive landscape for beauty and wellness brands sourcing from China.