(Yicai Global) April 22 -- Baling Technology, a Chinese manufacturer of automotive parts, plans to pay CNY66 million (USD9.8 million) for a 22 percent stake in an industrial hemp processor as domestic investors go mad for the cannabis sector.

Nanning-based Baling penned the deal with Mawang Kehua Biotechnology and its sole shareholder Yunnan Mawang Biotechnology Development on April 19, the investor said in a statement on April 19.

Mawang Kehua has plans to have a new processing facility up and running in September, with an annual capacity of 15 tons of industrial hemp, a commodity that China's stock markets have been raving about as of late.

Its parent company already has a production certificate from the local regulator, the statement added, saying the processor plans to extract the active ingredients, mainly cannabidiol, from hemp flowers and leaves. The facility's mainframe is already complete with test production underway. The firm hopes output will reach two tons this year before hitting capacity in 2020. 

Kehua Biotech has penned several long-term purchase agreements with local hemp planters to guarantee supplies and ensure it meets those goals, Baling said.

High on Hemp

Chinese hemp stocks have been on fire since mid-January, with many of them frequently surging by the 10 percent daily limit and as much as quadrupling this year to date. Many listed companies have unveiled plans to enter the sector in successful bids to inflate their share price.

Despite the surge, China's drug control committee said in March that the country strictly controls the cultivation of industrial hemp and has not approved plantations intended specifically for medical cannabis nor greenlit any drugs containing tetrahydrocannabinol or other active cannabinoids.

Editor: James Boynton