Yanling GUI

Institute of Modern Service, Zhejiang Shuren University, Hangzhou 310015, China

China is a large tea exporting country in the world, with a long history. In the middle of the 19th, China held a dominant position on tea export. However, influenced by domestic strife and foreign aggression, the export volume of tea dropped sharply, deteriorated by e merging countries producing teas,such as India and Ceylon.In 1949,tea export only represented 2% of global tea trade and the situation last until founding of new China, when tea export has become a major source of earning foreign currency. Tea export gradually got the opportunity of restoration and development during 1949-1990 when tea export volume grew from 9 900 to 199 000 tons.From 1990 until now, China tea develops faster and tea export is accelerating. Besides, China’s tea export reached 325 800 tons and export amount was as high as 1.247 billion US dollars in 2013, increasing by 3.92% and 19.64% , respectively.Nevertheless, hit by economic turmoil,China economy slowed down,causing a slowdown of tea export of China,deteriorated by growth of tea competitive power from Southeastern Asian countries, appreciation of the RMB and labor market in China. For exam ple, tea export volume was just 301 000 tons in 2014, decreasing by 7.5% year-on-year and export amount reached 1.27 billion US dollars, growing by 2.1% year-on-year. Therefore,tea competition becomes increasingly intense in global market, when supply exceeds demand, so that China’s tea is challenged[1].

Status quo of China’s tea

Extending tea trade and increasing export amount

Entering the 21stcentury, global tea market is increasingly extending,and China’s tea export keeps growing as well. In the decade, for instance,both of export volume and amount are improving in China, with an exception of few years under influence of global economic crisis. Specifically, tea export volume reached 280 200 tons and export amount was 437 million US dollars in 2004, increasing by 9.45% and 18.92%, respectively. Tea export volume maintained in the range of 280 000-300 000 tons during 2005-2009. In 2009, however, the export volume exceeded 300 000 tons and export amount overran 704 million US dollars. In 2010, the export volume totaled 302 400 tons and export amount achieved 748 million US dollars. Furthermore, export volume of teas reached 322 600 tons and exportamount 965 million US dollars in 2011,growing by 23.08% year-on-year. In 2012,however,the export volume was 312 500 tons, decreasing by 3.13%year-on-year, and export amount was 1 042 million US dollars, due to adjustment of China on export in nations,such as Morocco. In 2013, export volume totaled 325 800 tons and export amount was 1 247 million US dollars,creating new records. Nevertheless,export volume of tea declined by 7.5%year-on-year and dropped to just 301 000 tons, but export amount rose by 2.1% year-on-year, achieving 127 million US dollars[2].

As shown in Fig.1,export volume of tea grew by 7.42% in 2004-2014,and export amount increased by 190.62%. It can be concluded that export trade of Chinese tea keeps increasing year by year, with exceptions of few years. What’s more,export amount of Chinese tea was growing during the ten years, whose growth rate far exceeded that of export volume, because of domestic price and labor cost growth driven by rapid economy development, as well as global political and economic factors. It is predicted that export volume of Chinese tea would be 302 200 tons and export amount 1422 million US dollars in 2015 by weighted moving average method[3].

The changes of exporting countries and regions of tea

In 2014, the growth of global tea trade remained within a narrow range,and Kenya was still the largest country exporting tea, with export volume of 499 000 tons and year-on-year growth by 1%. China held the 2ndplace, with export volume of 301 000 tons, followed by Sri Lanka, India and Vietnam.

Currently, Chinese tea is exporting to 126 countries and nations,mainly including Morocco, the US, Japan,Russia, European Union, Southeast Asia and the Middle East, of which African areas represent 70%, followed by Asia,Europe and North America.In 2014,there were 11 countries and regions where the exported teas from China exceeded 10 000 tons, namely,Morocco, Togo, Uzbekistan, the US,Algeria, Japan, Mauritania, Russia,Senegal, Germany, and HK of China.What’s more, Morocco was always the top one where the most Chinese tea is exported to, accounting for 20%during the decade. Besides, the targeted markets for Chinese tea exporting are concentrated, and the countries and regions with exported 10 000 tons teas takes up to 66.5% of gross export volume. The export volume in this year, however, falls substantially,because market demands of tea decline in Morocco, Uzbekistan, the US,Japan, and Mauritania, reducing by 3.6%, 30%, 30.7%, 17.1% and 22.5%year-on-year accordingly.In Russia,in particular,the exported tea from China dropped sharply because of rouble depreciation, and it dropped from the 3rdposition in 2010 to the 8thin 2014[4].

Generally speaking, the changes of export market of Chinese tea are under influence of RMB appreciation,and the growth of labor cost, which results in appreciation of export price,and reduction of foreign market on Chinese tea. On the other hand, political upheaval, and epidemic situation are also factors influencing market demands, which should be taken into consideration. Besides, Europe and Japan have formulated stricter detection standards and concerning policies, so that China has to seek more markets from Africa, Asia and South America to avoid green trade barrier.

Table 1 The changes of exporting countries and regions of tea

Tea export dominated by green tea,and rapid growth of characteristic teas

In export trade, Chinese teas are dominated by green tea, followed by black tea and oolong, and characteristic teas include Pu’er tea, yellow tea,and white tea, which grow faster recently.With a long history,China takes advantages in international market in terms of production and processing.As for black tea originated in China,however, it is hardly for the quality to compete with black teas from India and Sri Lanka[5].

In 2014, different varieties all decreased in varying degrees. For example, export volume of green tea dropped to 249 000 tons and reduced by 5.8%year-on-year.However,green tea still played a key role in tea trade,accounting for 80%. Black tea was 28 000 tons, reducing by 15.6% yearon-year. Oolong export volume was 15 000 tons, and decreased by 9.7%.The scented tea export volume reached 5 782 tons, decreasing by15.7% year-on-year. Pu’er tea export volume dropped to 3 385 tons, with a year-on-year decrease of 25%, especially in Japan,Korea and Taiwan.

Table 2 The export volume and amount of different tea varieties during 2010-2014

The provinces and regions exporting teas

In China,Zhejiang,Hunan,Anhui,Fujian, and Shanghai are major provinces or cities exporting teas. For example, Zhejiang is always the largest province exporting teas for a long term,whose export volume maintains over 50% nationwide, but tends to be volatile recently (Fig.3). Export volumes from Anhui and Hunan are increasing year by year. In 2013, export volumes from Zhejiang, Fujian,and Jiangsu represented 61% , and dropped 10 points compared with 2004, but from Guizhou, Yunnan.Hubei and Sichuan rose dramatically.In Guizhou, in particular, the export volume increased by 456%,which is a potential market for Chinese teas. In 2013, the list of provinces or cities of top ten export volumes were Zhejiang,Anhui, Hunan, Shanghai, Fujian,Jiangxi, Yunnan, Guangdong,Chongqing and Hubei and the top ten export amount were Zhejiang, Anhui,Fujian,Hunan,Shanghai,Guangdong,Hubei, Jiangxi, Yunnan and Guizhou.In 2014, export batch, weight and amount declined by 6.3%, 9.4% and 6.3% in Zhejiang; export amount of Anhui was 46 900 tons, increasing by 18.59%, and export amount was 195 million US dollars, increasing by 35.16%,creating the records of growth rates over 30% in 4 successive years.Considering from nationwide, the decrease of tea exports from Zhejiang and other provinces causes export reduction of China[6].

Tea export dominated by general trade and supplemented by diversified forms

Chinese tea trades are generally proceeds according to the principle of one-to-one.In global market,however,tea trade is dominated by auction. For example, 95% teas of Sri Lanka are traded by auction.It is obvious that it is the unefficient trade model that causes low price of tea and chaos competition in China. Consequently, profit margin of Chinese teas keeps lower,weakening competitiveness of Chinese teas.

With accelerating of globalization,the modes of trade for tea starts changing, and purchasing agent, varieties and methods tend to be volatile accordingly. The result is that teas are either purchased from import corporations or self-supported in multiple batches.Besides, the purchased varieties are diversified from different tea companies by custom-made bidding.

Suggestions and Countermeasures

To adjust structure of export tea and improve added value of teas

Considering from global market,China tea is bound to popularity throughout the world and tea consumptions would be diversified as national strategy of One Belt and One Road advances. Therefore, China should grasp the opportunity to guide the world in consuming domestic high-grade green tea and black tea, reduce the quantity of loose-packed teas, and increase made teas. The key is to continuously enhance export volumes of characteristic teas, to change from confined tea variety to diversified varieties,improving gross exports.

According to smiling curve, Chinese tea is in the end of global tea industry chain,with low additional value.Currently,China is calling for industrial transformation, which is also suitable for tea industry.For example,it is necessary to underscore technical research and development and brand effect. Meanwhile, it is recommended to improve high value added tea products to comply with changes of demand and supply of Chinese teas. In the following two decades, what’s more,supply of Chinese teas would be higher than demand,and the only way is to increase the proportion of furtherprocessed teas and extend export volume. For instance, healthy tea products, as well as steeping teas, instant tea,and tea drinks can be developed as a new growth point for tea consumption, which are of high technological content and added value[7].

To fully make use of modern financial instruments to avoid exchange rate risks

With social development, new modern financial instruments are emerging, such as future foreign exchange settlement and foreign exchange option,which play a key role in avoiding fluctuation risks in exchange rate.For example,in trade finance,forfaiting is a financial transaction involving the purchase of receivables from exporters by a forfaiter and the forfaiter takes on all the risks associated with the receivables. Forfaiting, therefore,provides deferred payment terms for foreign purchasers and improves of export commodities, so that risks from exchange rate fluctuations can be well controlled by tea exporting companies confronted by appreciation of RMB.

To broaden financing channels for industry convergence

Presently, more and more tea companies go public on the Nasdaq and capital has become a crucial factor in improving global competitiveness.Confronted by powerful transnational enterprises, capital integration and business acquisition are the only way for further evolvement. Besides depending on banks and credit cooperatives,internal financing and introduction of cooperative partners are also available, such as emerging internet enterprises and real estate agencies,which allows effective asset allocation,better S&T development, and overseas promotion, and drives innovation and development of small and medium-sized companies by taking advantages in product R&D, and innovation of manufacturing techniques. Hence,these promotes products upgrading,industry structure adjustment and transformation of traditional raw material-based industry into complex industry, advancing industrial sustainable development. Additionally, support funds can be established in the provinces producing teas and R&S investment and related enterprises and independent innovations are encouraged[8].For example,banks could provide supports for tea exporting enterprises in the form of preferential loan to help the enterprises accumulate original capitals, which is conductive to innovative development and sustainable development of tea enterprises.

To strengthen international certification of tea enterprises and export standards

Confronted by technical barriers to trade from the US,EU and Japan,it is necessary to strengthen tea garden management and improve tea garden eco-environment, involving prevention on disease and insect damages, strict demands on pesticide use, in order to reduce influences of pesticides on tea export and develop organic tea garden or pollution-free garden. On the other hand, international standards should be widely promoted from production to marketing of tea in order to improve tea enterprises’ awareness of environment protection and green marketing.Besides,it is important to consolidate environment standard of tea industry and implement global green standards to gain acknowledgement of countries setting trade barrier.

Conclusions

Chinese tea industry starts slowing down after 10 years development,especially in recent years,which incorporates that it is necessary for Chinese tea export to be transformed and upgraded, because traditional export model dominated by raw materials and primary products falls behind already.In practice, China could adjust export structure of teas, which is dominated by green tea and supplemented by black tea and other tea varieties. On one hand, it is recommended to promote highly-graded green teas of China to the world, to enhance brand image and price of Chinese tea. On the other hand,it is suggested to reinforce development on new products of black teas in terms of tastes and appearance to improve global competitiveness. However, it is notable that cost of black tea should be under control,for highly-graded black teas are expensive, but the price of exported Chinese teas keeps lower. Therefore, it is crucial to integrate moderate price and high quality of black teas. As for characteristic teas, they are the most promising for China in world market.China could widely promote history and culture of characteristic teas and tea and coffee cultures are encouraged to be exchanged in the public by internet to make tea drinking a kind of fashion.Finally,it is feasible to intensify exports of further-processed teas and improve technological content in order to advance tea industry development.

In general, Chinese economy is faced with a crucial strategic development term when tea industry obtains a new development opportunity as well.With advancement of the Belt and Road Initiative strategy, Chinese teas would make more progresses, although affected by RMB appreciation,labor cost increasing, and global competition from Southeast Asia.

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