China’s tea industry welcomes international collaboration

The world leader with 45 percent of global tea production, China’s market operates by its own rules, shaping trends and carving out a unique profile.

Article by Barbara Dufrêne.

All images courtesy of Barbara Dufrêne.

A brief look at the three main hot beverages, tea, coffee and cocoa, shows that all have gone global during the past century and all generate significant export revenue for most of the producing countries. However, tea is the only cup that has maintained ancient traditions throughout huge growth in its home country, China, whilst the cocoa and coffee economies have been commercially developed far away from their origin places, which are respectively Mexico and Ethiopia.

In 2008 for the first time, global tea consumption reached the number one hot cup position, which had been held by coffee for decades, per the International Tea Committee. Since then global tea production has increased regularly, reaching 5.9 million tonnes in 2018, with China contributing 2.6 million tonnes to this output, that is, 45 percent. It is the growth of China’s tea production, which has doubled over the past ten years, that has generated this dynamic.

Being the leader of the world’s tea market since overtaking India in 2006, China is aware of its responsibility for maintaining a balanced supply/demand status. The Chinese civil servants in charge of the tea industry and its further development are therefore today readily available to share data, which they also provide to the International Tea Committee (ITC) and to the FAO Intergovernmental Group on Tea (IGG Tea) for publication.

Chinese Tea Market Data

There are 20 provinces in China that grow tea, of these the number one is Fujian, followed by Yunnan, Hubei and Sichuan. These four provided over half of the 2018 tea tonnage. Green teas represent the majority of production (61 percent), whilst the other tea categories all show increased market shares, with dark teas, which include the trendy puer teas, standing at 14 percent, black teas at 13 percent and wulong (oolong) teas at 10.6  percent according to the China Tea Marketing Association (CTMA).

Per capita tea consumption is steadily on the rise, with a growing middle class in urban areas earning more disposable income, although tea is now competing with the Western coffee fashion. After more than 20 years of carefully fostering the revival of tea traditions through the creation of attractive national brands like Ten Fu and Wu Yu Tai, the promotion of tea schools and tea art training, the staging of tea expos and tea events all over the country, tea is a flagship product again.

Ten Fu, the national tea brand, also has a chain of shops.

Famous origin teas get regular media attention and continue to belong to the selection of premium gifts, fetching premium prices. According to the Chinese Chamber of Commerce for Food (CFNA), the annual average per capita consumption grew to a calculated 1.17kg in 2017, leaving less than 15 percent of the output for export and attracting imports from India and Sri Lanka in particular.

Although exporting their teas is a highly favoured target for all companies, be they state owned or private, Chinese teas must cope with issues like pesticide residues, the absence of national grading standards and reference criteria, the language barrier and on top of this the hefty prices. Chinese teas are leaf teas, or orthodox teas. There is hardly any CTC tea for teabags, apart from some manufactured for the Chinese subsidiaries of multinational brands Lipton and Twining, which operate locally.

Furthermore, in China there is no blending of origins. Each producing region has specific botanicals and processing methods, so blending does not make much sense. China’s biggest export market is Morocco, having bought more than 70,000 tonnes of gunpowder green tea in 2018, followed by Uzbekistan’s and Ghana’s avid green tea drinkers.

Operating in the Chinese Tea Market

The interaction between state management and private ownership is an important feature for doing business in China. There seems to be tough competition between municipalities that run for brands and reputation and most of these big operators have financial support from the local China Communist Party (CCP). Chinese tea production is reported to come from smallholders for over 80 percent of the volume and this is an economic issue of major importance as it involves social responsibility in rural areas.

A smallholding in Yingshan, Hubei province.

These big regional tea companies all have their flagship stores and retail chains selling their brands. There are also dedicated tea markets in the towns of the producing areas, as well as in all the big cities, with the huge ones that are famous also outside China, like Maliandao in Beijing and Fang Cun in Guangzhou, where several thousands of brands and tea garden owners display their teas.

Several attempts have been made to introduce auction platforms, along the model existing in most of the other big tea producing countries, but to date this has not met with much success. In China people prefer dealing face to face, on individual level and negotiate their selling and buying on a personal basis, without disclosing prices or other contract details. Being introduced by a tea VIP with the right contacts and connections is of extreme importance, as it will provide the trust and confidence allowing to build up a long-lasting business relationship. This system is referred to as “guan xi,” which means “a caring personal relationship” and it is a key element for successful market operators. That also means that staying with the same trusted faces is highly appreciated in China.

This private way of operating leads the way for a strong position on the supply side, as there is little transparency and no platform for exchanging information. Although there are many big tea companies, which all have a large product portfolio, they cater to a knowledgeable and quality conscious home market consumer, who are prepared to pay for novel and premium products.

Therefore, Chinese teas have become quite expensive, which has opened the doors for imports from Sri Lanka and India in the past few years. According to Rachmat Badruddin, outgoing Chairman of the Tea Board of Indonesia, this is a unique feature of the Chinese tea market, the only place where it is the tea supplier who makes the rules for the price, a highly enviable position, and food for thought.

Inviting International Cooperation

There are two government bodies that oversee promoting tea production in China: the tea industry and the tea market. Both have their offices in Beijing.

The China Tea Marketing Association (CTMA) takes care of promoting the domestic market operators and the Tea Sub-chamber of the Chinese Chamber of Commerce for Food (CFNA) looks after the international connections and promotes Chinese teas in the export markets.

Both stage several tea events every year, both are keen to welcome foreign guests for discussion panels, market presentations, round table discussions and technical debates. These venues generate a lot of cross fertilization and favour international cooperation.

A smallholder factory located in Yingshan, Hubei province.

In this context, China has hosted two FAO IGG Tea plenary sessions, in 2008 and in 2018, in Hangzhou, which was recently named the Tea Capital of China. A result of the FAO plenary is the establishment of the Confederation of International Tea Smallholders (CITS), which has been tasked with the overall improvement of tea smallholders’ welfare and their economic and social empowerment. In order to allow work not only to start but also to progress, the CFNA has accepted the invitation of the Municipality of Yibin, Sichuan, to host the CITS premises for the first operating period of three years.

Yu Lu, vice president of CFNA and closely involved in the tea sector, regularly attends international tea venues in order to improve high level networking. She was proud to announce that China has offered to go a step further towards more international cooperation between the tea markets, both on the producer and consumer side. To this purpose, the CFNA has suggested the creation of an International Tea Cooperation Organization, under the acronym “T20 +” that will also have its first headquarters hosted by the Yibin Municipality.

Furthermore, there has also been private investment into promoting Chinese teas, with the Hua Ju Chen company creating the Global Tea Fair structure, which schedules around 30 commercial tea fairs all over China every year.

China has become highly proactive in promoting not only its own teas but also through giving full support to the global tea economy.

  • Barbara Dufrêne is the former Secretary General of the European Tea Committee and editor of La Nouvelle du Thé. She may be reached at: b-dufrê[email protected].

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