(Yicai Global) March 23 -- Shares in electronic cigarette maker RLX Technology nearly halved in value in New York yesterday after the Chinese government released draft regulations that the battery-operated device should fall in the same category as rolled ones, raising concerns that they might now be subject to the same high taxes.

Shenzhen-based RLX Technology [NYSE:RLX] plummeted 47.58 percent to close at USD10.15, giving it a market capitalization of USD15.8 billion.

“E-cigarettes share the same essence as rolled cigarettes in terms of core components, functions, means of consumption and other respects, and therefore will be subject to the same regulations,” the Ministry of Industry and Information Technology said yesterday.

The worry is if the high tax rate of 56 percent that applies to ordinary tobacco cigarettes will now also be applied on e-cigs. Previously the vaping device had been subject to the 36 percent tax rate for general consumer goods.

Though lightly regulated so far, e-cigarettes cannot be sold to minors, through online channels and all e-advertising is banned.

But it has been unclear up to now if vaping could be equated with smoking and local authorities have been largely left to make up the rules as they go along. Last July, the Shenzhen government ordered that ‘no vaping’ should be added to all ‘no smoking’ signs in public spaces.

Although e-cigarettes are not alight but are powered by batteries, they still generate a great deal of second-hand smoke that leads to severe indoor air pollution, Zhang Jianshu, chairman of the Beijing Tobacco Control Association, told the Beijing News last April. Their trendy nature also has a bad influence on the younger generations, encouraging them to smoke, he added.

Adopting the same regulations will ensure the standardized production and marketing of e-cigarettes, resolve issues of product quality, security risks and fake advertising, so as to ensure customers rights and interests, it added.

China’s e-cigarette sector has grown substantially in recent years. There were 174,399 e-cigarette firms in the country last month, up nearly four-fold from eight years ago, according to data from iiMedia Research.

Editor: Kim Taylor