Tea exports from China have risen dramatically over the past few years and are forecast to increase further, which is a cause for concern in many developing countries that depend on tea sales, according to a recent front-page article in the New York Times.¹

According to the article, Chinese figures indicate that the production of tea (Camellia sinensis [L.] Kuntze, Theaceae) increased 8.7% in 2004. Tea production is accelerating due to newly planted tea bushes reaching maturity, inefficient state-owned farms transferring to output-conscious entrepreneurs, and favorable government policies promoting tea industry growth. It is now estimated that China will soon become the world's largest tea exporter by tonnage, overtaking Sri Lanka in 2005 and Kenya in 2006. Meanwhile, the tea super-producing country of India continues to battle aggressive competitors including ChinaÑIndian tea exports continued to plummet from 200 million kg in 2002 to 145 million kg in 2004. A kilogram of good quality Assam black tea that fetched $1.69 in the auctions in 1998 is now selling for $1.28.² According to information presented at the Intergovernmental Group on Tea meeting in Bali (July 20-22, 2005), global tea production continued to reach new highs in 2004, when output grew by 2% over 2003 volumes to reach an estimated 3.2 million metric tons. Experts at this consortium agreed that tea consumption is generally flat with few exceptions.

China's success in the tea market, meanwhile, could threaten the economies of various developing countries. Tea production is a huge employer in such areas as Bangladesh, India, Sri Lanka, Indonesia, and various East African nations. According to the Times article, countries that suffered from the tsunami of December 2004 are particularly vulnerable to Chinese competition in the tea industry. In Sri Lanka, the tea business helps feed nearly a tenth of the population. Four dozen large farms producing black tea leaves in these threatened countries have already shut down over the past 2 years, causing the displacement of tens of thousands of workers in southern India alone.

China's preeminence in the tea industry, however, seems to reflect its history with the beverage. The British East India Company, which acquired its tea from China, held a monopoly on tea supply to Britain until 1834, after which other countries finally became big exporters. The Times article states that the origins of tea itself are often traced back to ancient China. The earliest literary reference, dating back nearly 5,000 years, tells of how Chinese Emperor Shen Nung discovered the drink after tea leaves accidentally dropped into his hot water.

According to the article, government support encouraged the 18.9% jump in Chinese tea exports in 2004, which totaled $437 million. In Beijing, for instance, municipal and provincial governments offered subsidies to the tea industry to alleviate lingering poverty and unemployment in the countryside, and they paid up to half the cost of planting new tea farms and building tea-processing factories. Beijing has also eliminated an 8% tax on tea production as a way to increase rural incomes.

Tea consumption in China, on the other hand, has grown only 2 year. Young Chinese citizens, in particular, have been showing a preference for other beverages, including coffee and Coca-Cola. The abundance of Chinese tea entering global markets will likely continue only if Chinese people keep switching to these other beverages. Other challenges, including unpredictable weather patterns, land erosion, and the increasing demand for certified organic teas, could also affect the future of China's currently bright tea business. Furthermore, the near stagnation of the global market has caused reluctance among some Chinese officials to comment about future levels of tea production. On a brighter note, exports of Chinese green tea to Japan—much of it used to manufacture ready-to-drink tea beverages—and the United States, where higher-grade Chinese teas are becoming increasingly popular, are accelerating. China, like much of the global tea producing industry, is viewing the United States as an emerging market for better quality specialty teas, which command significantly higher dollar volumes than their conventional counterparts.³

References

1.Bradsher, Keith. Read the tea leaves: China will be top exporter. The New York Times. October 11, 2005:A1, C4. Available at: http://www.nytimes.com/2005/10/11/business/worldbusiness/11tea.html. Accessed December 5, 2005.

2.Indian tea will soon wake up Japanese. Times of India [Web site]. October 27, 2005. Available at: http://www.plentea.com/news/latest_tea_news/indian_tea_for_japan.html. Accessed December 2, 2005.

3. Tea Is "Hot" Report, 5th ed. (rev. 3/2005). Seattle, WA; Sage Group International.