Yang Ming, China's leading expert on hemp at the Yunnan Academy of Agricultural Sciences, studies the plant in the field. (PHOTO / CHINA DAILY)

A narrow, meandering stony path connects the suburbs of Eshan, a small town in the southwestern province of Yunnan, with a factory perched in the neighboring mountains.

The factory buildings have no windows, so small fans on the roof run constantly to allow fresh air to enter. Inside, workers in lab coats oversee hundreds of pieces of equipment.

"For the first few months after my company started operating, the local police visited the factory several times a week. They suspected we were secretly making illegal drugs in the mountains, like you see in the movies," said Pan Zongbing, CEO of Hankang (Yunnan) Biotechnology.

In the 1950s, the government banned the cultivation and use of marijuana, but in 2010, Yunnan introduced the country's first regulation on the commercial planting and processing of hemp

Rather than illegal activity, the company is focused on extracting substances from hemp plants. Pan opened a small box on his desk and took out several glass vials; some held a white power, while others contained a clear liquid. None emitted any special odor.

"It's cannabidiol, more commonly known as CBD, a nonintoxicating extract (of the Cannabis sativa plant). It has been described as a 'rising superpower', because it is highly valued in the international market and is thought to have great potential in a wide range of uses, including cosmetics, food and, most importantly, medicines," he said.

In the 1950s, the government banned the cultivation and use of marijuana, but in 2010, Yunnan introduced the country's first regulation on the commercial planting and processing of hemp, the industrial strain of the plant.

Since then, hemp has been grown in the province, but the concentration of tetrahydrocannabinol－or THC, the mind-altering ingredient in marijuana－is no more than 0.3 percent, an extremely low level.

Cannabidiol, also known as CBD, a nonintoxicating extract of the Cannabis sativa plant, is highly valued for its uses in medicine, cosmetics and food. (PHOTO / CHINA DAILY)

Yang Ming, a hemp expert at the Yunnan Academy of Agricultural Sciences, said farmers mainly grow the plant for its seeds, fibers and CBD.

"So far, scientists have identified more than 500 extracts in cannabis plants. Nearly 100 of the extracts are found in the flowers and leaves. The various cannabis plants have different amounts of these extractives, and the one called 'industrial hemp' is a legal crop in many countries," he said.

He added that CBD has come under the international spotlight in the past five years after research suggested it could be used to treat many problems, including anxiety and insomnia, and as an analgesic.

Foundations

Early in 2009, Pan learned about CBD from a business partner in the United Kingdom who worked in the cosmetics sector. "He told me CBD was used overseas in cosmetics, healthcare products, pet food and even medicines. Moreover, it sold for about US$4,000 per kilogram in the international market, which sounded very profitable," he said.

Pan Zongbing, CEO of Hankang (Yunnan) Biotechnology, displays CBD in Eshan, Yunnan province, in January. (YANG WANLI / CHINA DAILY)

"He tried to persuade me to grow hemp in China and extract the CBD. I refused. After all, many people associate anything hemp-related with additive drugs. How could I dare enter such an illegal business?"

Despite initially dismissing his friend's suggestion and blocking CBD from his mind, Pan later began researching the subject. Having learned more about the extract and its potential, he founded Hankang in 2014 with the help of experts from the academy. The company was the first in Yunnan to be granted a certificate to legally process hemp.

Hankang now grows hemp on 333 hectares of land spread across several cities and towns, including Eshan, Xinping and Yuxi, and extracts about 5 metric tons of 99 percent pure CBD a year.

"Seventy percent of it is exported to the UK and the other 30 percent is sold to buyers in the United States. In addition to nutritional supplements, cosmetics and pet food, the extract is used in many foreign countries as an ingredient in drugs to treat childhood epilepsy," Pan said.

As a newly emerging trend, Pan said the sector lacks accurate global data about the scale of planting and production. Moreover, there is no regulated market price, but approximations are released by a number of industry associations and research institutes.

According to Brightfield Group, which collates data about the CBD and cannabis industries, China was the world's leading CBD supplier in 2018, with sales of nearly US$1.2 billion. It was followed by the United States (US$1 billion), Europe (US$980 million) and South and Central America (US$220 million).

In the past five years, the booming industry has attracting a growing number of companies looking to extract CBD from hemp leaves and flowers. Some are biotech specialists, while others operate in the pharmaceutical sector.

According to Yang, Yunnan is the global pioneer in large-scale CBD production and the province is home to more than 30 startups, seven of which have already begun operations.

"The high-purity CBD produced in the province now accounts for more than half the global market share, and our extractive technology is a world leader," Yang said.

"Yunnan is a renowned international producer of high-quality CBD, which is mainly exported to the US, Canada and European countries."

Strict supervision

China takes a hard line on illegal drugs. The cultivation and use of marijuana is strictly prohibited, with traffickers facing the death penalty in extreme cases. Yunnan and Heilongjiang, in the northeast, are the only provinces that allow the large-scale planting and processing of hemp.

According to Yang, Heilongjiang's hemp is mainly used to make textiles, while Yunnan's producers focus on extracting CBD and growing seeds for the vegetarian and vegan market because they are an outstanding source of fatty acids, such as Omega 3, 6 and 9.

In recent years, provinces such as Shanxi and Gansu have started small-scale hemp-cultivation pilots.

Yang said hemp was grown on 11,330 hectares in 14 cities and autonomous prefectures last year. The sector has brought much-needed investment to Yunnan and farmers have also benefited.

"A farmer can charge about US$300 for 0.4 hectares of hemp, much more than corn or flax," he said.

"Although they look similar to marijuana, industrial hemp plants contain very little THC and will not produce mind-altering sensations if the flowers or leaves are smoked. However, that similarity increases the risk of potentially illegal activity."

He stressed that the regulations provide strict supervision of each link in the industry chain, from seed supply to the destruction of waste products.

Pan said all the hemp seeds his company grows for CBD extraction are registered with the local public security bureau and police officers inspect the processing facilities at least three times every week.

The waste－the only possible loophole for the illegal extraction of THC－must be destroyed. "The process is recorded, and then documented at the local police station," Pan said.

Tian Wei, general manager of Yunnan Hempsoul Biotechnology, which was granted permission to extract CBD in 2017, said uncertified hemp plants are destroyed in the fields, while legitimate ones can only be processed under extremely strict protocols.

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"At least 80 tests are conducted during the procedure. Even the cleaning cloths used in specific sections are color-coded to distinguish them from each other," he said.

Hempsoul's factory is situated in a remote valley west of Kunming, Yunnan's capital, next to a weapons manufacturer. To ensure maximum security, most of the employees are People's Liberation Army veterans or former employees of the armaments factory. Also, the facility has dozens of closed-circuit cameras that stream footage directly to the Yunnan Public Security Bureau.

Pan said: "Honestly, it is too costly to extract THC from industrial hemp. The low profits would not even begin to justify the risk of breaking the law."

Future aims

Hempsoul produces 2 tons of CBD every year. It is destined for markets in 41 countries and for a wide range of uses, from anti-mite materials in luxury bedding to drugs to treat depression, insomnia and epilepsy.

"Our future aim is to definitely explore the use of CBD in medicines," Tian said.

In addition to CBD, companies are extracting Cannabidivarin, or CBDV, a nonpsychoactive cannabinoid that has gained attention in medical circles for its potential in the treatment of neurological conditions. So far, it has been studied less than its more famous counterparts, such as THC and CBD.

Meanwhile, even though it is sold overseas, CBD has not been authorized for consumption in China, which only permits its sale for use in cosmetics.

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"As the global demand is booming, especially for related medical properties of CBD, I believe it is only a matter of time before China approves the compound for ingestion (either as a medicine or nutritional supplement)," Tian said.

Shi Wenzhi contributed to this story.