MATT Lei, 32, was inhaling from a black box about size of his palm as he stood in front of a department store in downtown Shanghai, chatting with two friends.

A younger man, standing only meters away, was gawking at him, resisting his embarrassed girlfriend’s attempts to pull him away.

“He was completely mesmerized,” Lei recalls. “He probably thought I was doing drugs. Not many Chinese could recognize electronic cigarettes.”

The Oxford Dictionary pronounced “vape” to be the “2014 Word of the Year.” It refers to the act of “smoking” an e-cigarette, creating vapor, not smoke.

Despite global popularity and controversy about their use, e-cigarettes are still widely unknown in China, even though the country invented them and has become the largest manufacturer of the devices.

China has the world’s largest number of tobacco smokers — an estimated 300 million. As the government embarks on more stringent anti-tobacco health campaigns, the popularity of tobacco-less smoking is expected to increase.

On June 1, new regulations come into force in Beijing banning all tobacco cigarette advertising, banning smoking in indoor public areas and banning the sale of tobacco within 100 meters of schools and children’s activity centers.

Other cities are expected to follow suit.

“That will be a big opportunity for the e-cigarette market,” says Li Wangfeng, organizer of China’s first eCig Expo in Shenzen, Guangdong Province. “Just look at how South Korea’s market rocketed within months after its tobacco tax increased.”

About a decade ago, the electronic cigarette was first invented by Chinese pharmacist Han Li, who co-founded Ruyan, one of the biggest manufacturers. Today, more than 500 Chinese companies, mostly in the southern city of Shenzhen, ship more than 300 million e-cigarettes devices to Europe and the United States every year.

“I knew absolutely nothing about it before I went to California,” says Alex Wang, 25, who started selling vape equipment on the Taobao online retail platform during his stay in the US last year. “It was so popular there.”

He recently returned to Shanghai and plans to expand his business here.

“It’s quite cool,” Wang says. “You get to quit smoking the really harmful chemicals in regular cigarettes. Vaping is cheaper and it isn’t taboo indoors. I believe Chinese will catch up with the trend quickly, like they do in all other popular world products.”

The e-cigarette uses battery-powered atomizers that convert a solution into vapor to be inhaled. Some solutions contain nicotine; others do not. The benefit, such as it is, comes from the absence of cancer-causing tar and other chemicals found in tobacco cigarettes.

The product has become especially popular among young people in the West because it’s cheaper than heavily taxed tobacco and offers highly personalized flavors, from black tea to popcorn. The craze has been helped by celebrity users like Leonardo DiCaprio, Kate Moss and Lindsey Lohan.

The question remains: Is this a safe alternative to tobacco? Scientific studies are underway, with both proponents and opponents emerging to weigh in on the debate.

Aside from the device itself, some health experts have voiced concerns about inaccurate labeling of vapor ingredients and unsafe copycat devices that may emit toxins or even explode from overheating.

With the jury still out, the World Health Organization is encouraging smokers to stick to proven quit-smoking aids, like nicotine patches.

Regulation of e-cigarettes, where it exists at all, varies from country to country. Mexico, Singapore and Brazil have banned the product completely. In other nations, debate continues about whether e-cigarettes should be categorized as food, tobacco, medicine, electronic or consumer goods.

The US Food and Drug Administration is proposing regulations that will ban sales of e-cigarettes to minors and will require manufacturers to disclose all ingredients. The rules have been criticized by vape supporters as too restrictive and by health officials as too lax. Some states in the US have imposed high taxes on electronic cigarettes or banned their use indoors.

China hasn’t reached the stage of any definitive policies, leaving the development of e-cigarettes unfettered for the present.

“It’s about time this home-born product takes off in the domestic market,” says Li, the eCig Expo organizer. “Manufacturers started to look at the potential of the Chinese market in 2013, but it wasn’t until last year that online and offline sales started to take off.”

According to data released at the April expo, electronic cigarette sales increased by 263 percent in 2014, while revenue from the top 10 e-cigarette brands on Taobao reached 140 million yuan (US$22.6 million) and is expected to top 400 million yuan this year.

Thousands of vendors are available on Taobao, with the price of the devices ranging from 20 yuan to a few thousand yuan.

Li, project manager of Creativity Convention & Exhibition, helped establish the eCig industry association in Shenzhen, drawing about a third of manufacturers to the April expo. Another expo is planned this summer in Beijing, and Shanghai’s first large offline vape store is scheduled to open soon in the Pudong New Area.

Lower cost may not be such a big factor in promoting e-cigarettes in China since tobacco is relatively cheap here. A pack of cigarettes in China averages around US$2 or US$3, about a fifth of the cost for similar products in Australia.

Still, the government here is slowly raising tobacco taxes to discourage smoking. They were increased from 5 percent to 11 percent at the wholesale level on May 10.

But other factors also come into play.

“Because of the heavy smog in China and health issues, more Chinese are becoming aware of the hazards of smoking,” says Li. “That’s a big reason for vape’s rapid development, especially in northern areas of China where air pollution is most prevalent.”

However, some worry that e-cigarettes are making smoking cool again, just as Hollywood movies made it cool in the past. The first known appearance of electronic cigarettes on the silver screen came in “The Tourist,” with Johnny Depp vaping on a train in the film.

Certainly a new subculture is brewing.

Online vendor Wang says there are online forums where e-cigarette users swap information on different products and mixing flavors. He says vaping parties are being organized where online friends can meet.

Lei, a Shanghai-based Chinese Australian, says he has turned his home study into a mini-lab with small tubes and plastic bottles where he experiments making different vapor flavors.

Last year, the first e-cigarette café, The Vape Lab, opened in London. Some companies are even trying to capitalize on the trend by turning e-cig devices into collector’s items, such as a US$4,999 model supposedly made from a meteorite formed 4.7 billion years ago.

Still, despite all the hype, old habits die hard.

Wang says the most frequently asked questions he gets go something like this: “Do you have e-cigarettes that taste like Zhonghua (or Chung Hwa, a popular Chinese tobacco brand)?”