In Traditional Chinese Medicine (TCM), Xiao Hui Xiang belongs to the 'Herbs that warm the Interior and/or expel Cold' category. Herbs in this category are used for Internal Cold with Qi Deficiency and/or Yang Deficiency. In the Yin and Yang system of thought Yang is Hot in nature. A deficiency of Yang will therefore lead to Internal Coldness since there will as a result be more Yin (Cold in nature) than Yang. In extreme cases this can lead to so-called 'Yang collapse' with convulsions or coma and these herbs are particularly indicated to treat such scenarios.

As suggested by its category Xiao Hui Xiang is Warm in nature. This means that Xiao Hui Xiang tends to help people who have too much 'Cold' in their body, although with less effect than a plant that would be Hot in nature. Balance between Yin and Yang is a key health concept in TCM. Those who have too much Cold in their body are said to either have a Yin Excess (because Yin is Cold in nature) or a Yang Deficiency (Yang is Hot in Nature). Depending on your condition Xiao Hui Xiang can help restore a harmonious balance between Yin and Yang.

Xiao Hui Xiang also tastes Pungent. The so-called 'Five Phases' theory in Chinese Medicine states that the taste of TCM ingredients is a key determinant of their action in the body. Pungent ingredients like Xiao Hui Xiang tends to promote the circulations of Qi and Body Fluids. That's why for instance someone tends to sweat a lot when they eat spicy/pungent food.

The tastes of ingredients in TCM also determine what Organs and Meridians they target. As such Xiao Hui Xiang is thought to target the Kidney, the Liver, the Spleen and the Stomach. According to TCM, the Kidneys do not only regulate the urinary system but also play a key role in the reproductive system and the growth and aging process of the body. The Liver on the other hand is often referred as the body's "general" because it is in charge of regulating the movements of Qi and the Body Fluids. It also takes a leading role in balancing our emotions. The Spleen assists with digestion, Blood coagulation and Fluids metabolism in the body. The Stomach is responsible for receiving and ripening ingested food and fluids. It is also tasked with descending the digested elements downwards to the Small Intestine.