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The Present and Future of the Chinese Tea Market

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The Present and Future of the Chinese Tea Market 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 <Black tea in English>(Gong-Fu, Broken type) and Oolong tea. b.' Bian-Xiao tea is also called Jing-Ya (Compressed) tea, and it basically is the tea for minorities in remote areas. It has many different kinds, and each minorities has different drinking customs and prefer different types. Tea is a must have product for minorities. In 1980's, there were 13 specialized Bian-Xiao tea factories in Sichuan, Hunan, Hubei, Yunnan and Guizhou provinces, which are invested by the nation, and subsidized mainly for the purpose of securing the production level and to maintain the Bian-Xiao tea sale price at a lower level. The amount of consumption is quite large, and that the average annual consumption of tea for Tibetans, Mongolians and Uighur is about 5 kilograms per head, which is at least 2.5 kilograms more than other tea drinking minorities. ® Consumption by regions There is a significant increase in domestic tea consumption, it is second in the world, it consumed 424,000 tons in 1999 which rep~esents 2/3 of the total amount of production, nonetheless, individual consumption is merely at 300 to 350 grams per head. This is the level of the world in 1970's, and is about 3/4 of the present average annual consumption of the world per head. However, China has a large potential tea consumer. Currently, only 1/3 of the population is drinking tea. Looking at the population of China today, which is about 1.27 billion, possibility of increased tea consumption in the future is high. Nei-Xiao tea consists of various different kinds of tea, and consumers in different region have different demands. Zhejiang, Anhui, Hunan, Jiangxi and some other provinces mainly consume green tea. Fujian and Guangdong provinces mainly sale Oolong and Red tea (Black tea in English). Hubei, Sichuan and Jiangsu provinces mainly prefer green tea and flower-scented tea. Beijing, Tianjing districts and North-Eastern 3 provinces drink almost only flower-scented tea. Most of the tea is full leaf tea. Consumption of tea bags and canned tea drinks (canned, PET bottled) are much lower than those of Europe, USA and Japan. The annual consumption of tea bags is merely about a few to several thousand tons. Tea drinks (canned, etc.) have started in about 10 years ago in China, and presently consuming 500,000 tons, which represents 8% of the beverage market. I think there is a large possibility that it will become a core drink in the market in the future. @ 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.
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