The present and future ofthe Chinese tea market.
Wang Ya-Lei
Chinese Tea Assoc. ofJapan
As know, China is one of the main tea producing nations in the world. Especially after the birth of the New China, area and amount of production, foreign trade and domestic trade have all been developed rapidly. Before 1980's, the government was controlling the tea planting, production and marketing, because of the planned economy system. As is for other agricultural products, land reform and marketing reform became always two important core points in the "rural area reform" since the end of 1970's. Chinese tea marketing reform is facing a dilemma between the old planed economy and the new market economy. It is standing at the crossroads. According~y, the present market is still under development and it is far from perfect. In China, the annual production of tea is 680 thousand tons. Of which about 2/3 is consumed domestically and about 1/3 is for export to over 100 countries. In recent years, the number of persons, who are working in the tea industry, is increasing and is getting close to one hundred million people. On the other hand, there is about thirty hundred million Chinese drink tea. There are many different scale Tea-Market places spreaded in all over China, and which are mainly for the wholesale. In recent 10 years, the "famous tea" market developed rapidly, and the price of these teas are much than ordinary teas. In the near future, China will become a member of WTO, accordingly, tea industry and trade must be entirely reformed. Tea marketing will inevitably going toward the direction of the market economy system. Keywords: China, Tea, Market, Export
From the beginning of the "Village Reformation", Agricultural Land System and Crop Marketing System became the two important reformation targets. Looking at the reformation history in the past 20 odd years, Agricultural Land System has already developed a variety of different forms. Land ownership and the right of land use has changed from "Two Rights Combined" to "Two Rights Separated", and that each different places in China has its own Agricultural Land Usage System and Forms. This improved efficiency in land resource arrangements, and which in tum developed rudimentary property right system in harmony with market economy mechanism. However in a whole, the reformation of Crop Marketing System is standing unsteadily at the crossroads of the Planned Economy and the Market Economy.
In the recent 50 years, tea production and trade has developed very well. During 1950-1998, tea production and trade has increased on the average at the speed of 17.5% and 81.4% per annum respectively. In China, it produces Green tea, Red tea (Black tea in English), Black tea (or Dark Green tea), Blue Tea (Oolong'tea), Yellow tea and White tea. The total production in 2000 amounts to 683.3 thousand tons, of which Green tea accounts 500 thousand tons, Red tea 47.1 thousand tons and Oolong tea at 64.2 thousand tons.
As everybody knows, until 1984, marketing system of tea in China was taking the form of "Pai Gou" quota purchase system (commercial authorities purchase from the manufacturers the allotted amount of tea) and restricted the purchase of tea by the Right of Purchase Certificate. However since 1984, tea marketing system has changed. Except the "Bian Xiao tea" which succeeded the "Pai-Gou" system, both dom~stic and export use tea had completely opened its market for free trade. Negotiated purchase and sale system be carried out, and thus fostered free opened market and various new market rules, and of course, the Right of Purchase Certificate had been cancelled.
Today, production, domestic consumption and export are all growing, but as amount of production is larger than the sales (including domestic and export), domestic and export prices (except the "famous teas") are moving at low levels. During this period, the scale of the tea manufacturers are still small, problems 'of confusion in tea marketing system arose, hence one of the most important
-49- Session N job now is to establish an orderly domestic tea marketing system. Establishing the orderly domestic tea marketing system will then result in setting up a system to correspond the world tea market (green tea especially), which in tum will help to promote tea export.
I. Market of Chinese Tea classified The share of the agricultural products in the total export quantity has decreased. China is one of the important tea producing, consuming and exporting country. About 1/3 of the total tea production is exported, and 2/3 is being domestically consumed. 1. Domestic Consumption CD Domestic Trade Classified into Nei-Xiao (Domestic Sales) and Bian-Xiao (Remote Area Sales) teas. a. Nei-Xiao tea is the various tea sold in China except in remote area to minority races. The sales area of Nei-Xiao tea is widely spread in China, especially intensive in large and middle cities, industrial, mining industrial and the villages where people have tea-drinking custom. The pan-roasted green tea stands first in Nei-Xiao tea, but it also consists of Flower Scented tea Gasmine, orchid etc.), Red tea
@ Export movements Although tea has been one of China's most important traditional export items, after entering into 1990's, its export status had been down graded, and the tea export
Session N -50- stands only at 0.2% of the total export now. 1/3 of the total tea production is being exported to 90 countries (regions) in the world. Export tea consists of red tea (black tea in English) and green tea mainly but also has Oolong tea, Flower scented tea and Pu-Er tea. For example, in 1998, total tea export was 217,200 tons, and of which green tea is 111,700 tons representing 51.4%. Red (black in English) tea is 69,600 tons representing 32.05%. Oolong tea is 16,800 tons representing 7.73%. Flower scented tea is 15,600 tons representing 7.2%. Pu-Er tea is 3,400 tons representing 1.57%. In the world market, red (black in English) tea is the main tea item, and its share is about 91 %. Of which China has only 10% share. In the red (black in English) tea market, main product is CTC broken type tea, however, quality-wise it has no advantage and the price is cheap. China has only small amount of CTC red tea for export. Export country counts over 60, and it is exporting more than 5,000 tons to UK and USA. In the world green tea export market, China is almost in monopoly. It has over 85% shares in the total green tea export amount. Main export destination is northern Africa. For Oolong tea, Japan and Southeast Asia is the main export destination.
II. Tea Marketing System 1. Modem Tea Marketing System in China Since the foundation of People's Republic of China, Tea Marketing System in China can be roughly classified into 3 different stages; Free Purchase Sale Period, Pai-Gou Period, Open Reformation Period. CD Free Purchase Sale Period (1950-1953) During this period, tea trading companies, factories and private companies purchase can purchase/sale tea all at the same time. After the new China is founded, on Jan. 30th 1950, the National Commerce Department announced that "to organize the China Tea Leaf Company to unite the purchase of tea from each region. And that every nation-owned companies, trading houses, authorities are banned to purchase tea from the market, and must cooperate with the China Tea Leaf Company for them to purchase the tea at each locality. @ Pai-Gou Period (1954-1984) During this period, the government planned and enforced strict quota policy with Pai-Gou system in tea purchasing and sales. Tea purchasing and sales system was under sole control by the government tea companies in each province, for both domestic market and as export raw material supply. This period, under the policy of "Priority for Export, Guarantee for Remote Area", the sale of tea was limited to those who have Right of Purchase Certificate. @ Open Reformation Period (1985-present) On June 9th 1984, the Department of State issued a document numbered 1984-75 with the title < ---.-51- Session IV policy, taxes must be paid before the tea can leave the region, and worse, there were not enough national tea market places. According to Messrs. Xu and Li's study report (1995), until 1995, there were only a few tea market places in the nation. After 1990's, more tea market places appear in the nation. For instances, a. So-called "the First Tea Market in the South of Yangtze River" in China which is the Eqiao Tea Market is located in Eqiao village, Fanchang prefecture, Wuhu city, Anhui province. The area ~s 8 hectare, 500 regular shops with 3000 temporary stalls, and is selling over 1,000 kinds. of tea. Shop owners and other personnel amounts about 30,000 people, making annual trading volume of 32,000 tons and sales of RMB¥I.26 billion (or JP¥18.9 billion). Close to the second largest city Wuhu of Anhui province, which about 30km away. b. Jinan Tea Wholesale Market in Shandong province. It mainly deals with Jasmine tea, and it is a very famous market place specializing in wholesale business in northern China where tea is not produced. c. Newly opened (December last year) Oolong Tea Capital in Anxi prefecture of Fujian province where the homeland of oolong tea is. 2. Marketing Routes In modem China Before 1980's, there were only 3 export companies in business, each at the ports of Shanghai (green tea), Fujian (oolong tea) and Guangdong (Red! English Black tea). Before 1991, there were 18 export companies specializing in tea. In April 1997, the Foreign Trading Department published < ill. Future Prospect As China is going to participate in WTO, demand for higher sanitary standard for both export use tea and domestic use tea will be stronger. . For the purpose of propagating the tea culture, study of tea's virtue, tea culture study panels have been held allover the places. Many Tea houses and Tea Art houses have been opened one after another. For instances, there are over 300 in Beijing, and over 100 in Hanzhou city. Instant tea beverages (red, green, jasmine, oolong etc) have been ever popular in China, however, of which oolong tea became the most popular item due to its various virtue. On the other hand, prices ofChinese tea may go up. I believe as living standard in China improves, and healthiness of tea drinking is widely known, tea beverage ~arket will have the possibility to grow much larger. The world has already approved tea is one of the important and healthy beverage in the 21 st century. Some countries and FAO of United Nation encourage youngsters to drink tea. Developments of tea drinking habits overseas will sure help to improve Chinese tea production and its markets. In order to attain this, I think the "following few points are important to the tea industry in China: CD It is important to match the tea production against the population; ® I believe the packages should be easy, practical, beautiful and sanitary; @ To incorporate overseas experiences into Chinese manners and .customs. Until today in China, tea production, domestic marketing and export are all under government control. Businesses dealing in tea are small scaled. No not even middle sized ones. In this sense, I trust there is a necessity to setup an association, which will include manufacturers, marketing or logistics industry and export industry. Next month, China is expected to join the WTO, which means tea marketing system in China will sure change. Session IV - 52 -