September 2000 Issue
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All the Tea in China

by Bridget D. Farrell

We're still impressed when a person will not give something up "for all the tea in China." Recent times, however, have made this amount less impressive than in the past. In the twenty five years since the Chinese government reformed agriculture on the mainland, tea production has suffered in both quantity and quality.

This should come as a surprise to many observers. Tea almost naturally seems as though it would be one of the top success stories of Chinese agricultural reform and economic growth. Not only does it have a long legacy in China, but also its popularity is increasing dramatically around the world, making it a potentially valuable export resource. Yet, the tea industry is still troubled by finding the efficient levels of production and export that will make tea a consistently profitable commodity. Two experts, Dan Etherington and Keith Forster, have called this the "no man's land between the plan and the market."

The Chinese government changed the way agriculture was produced in the 1970s and early 1980s. Previously, farms were state owned, and farmers worked together on farming communes. The government purchased all of the harvest from the state farms at set prices. During the Chinese Reform Era, the farming communes broke down and individual households and farmers could grow their own crops on their own land. Still, not all vestiges of the old system were lost as the government contracted to buy most of the harvest output from individual farmers and continued to operate large scale farm communes through the prison system.

For most agriculture industries, the new individual household farms have brought significant gains in production and profit. The institution of household farming and the increase in market freedom prompted farmers to adjust their production activities in accordance with profit margins.

Yet, the gains are missing in the tea industry. For example, with nearly half the world's total tea gardens, China produces only about twenty percent of the world's tea output. Moreover, in 1990, China's average yield of tea per hectacre was 500 kilograms. This yield is historically low. In 1914 - 1918, Chinese tea farms yielded 900 kilograms per hectacre. This yield is also low compared to other tea producing nations. India, whose tea plantations utilize modern agriculture technology and business practices, yielded an average of 2,000 kilograms per hectacre of plucked land in 1990.

Observers can attribute these disappointing results to one of three problems in Chinese tea production. One problem is that the Chinese government continues to contract to buy most of the tea harvest. Contract prices reflect not only the market value of the crop, but also incentives to grow other crops, like wheat, or make other uses of the land. In addition, contracts are often far shorter than the ideal time for cultivating a tea plant and provide farmers incentive to raid their tea plants before the plants have fully matured, giving the best tea.

A second problem is that small, individual household farms are not efficient for tea growth. Large farms in India, Sri Lanka, and Indonesia allow for a more efficient use of resources and scientific management techniques. The problem of allocating tea production to small individual farmers is aggravated when one considers that tea is seen mostly as a spare time crop. Tea is often grown on the side, not as the farm's major crop. Most individual Chinese farmers are not giving tea the appropriate investment in acreage and time that long-term tea plantations around the world would.

A third problem is the continued use of laogai prison labor in tea production. Since the Reform Era, laogai plantations have continued to produce up to one third of the tea produced in China. Laogai tea farms offer none of the incentives that make tea production efficient. Prison laborers are not motivated, like for profit farmers are, to invest the time, acreage, and technology required to make a profitable investment in tea. This is a drain on land that would otherwise be ideal for cultivating tea.

What's the future of Chinese tea production? The problems of government contract length and price for tea will slowly fade away as the Chinese tea industry becomes more market oriented and China as a nation accedes to the World Trade Organization. The problem of farm size will also be slowly solved as China continues down the path of market reforms and allows foreign corporations with up to date technology to make investments in Chinese tea. The international press has focused much attention on prison labor in the past decade, and this, too, is sure to eventually go away as China promises to trade fairly with other nations. Although the Chinese tea industry is currently stuck between agricultural reforms and a free market, the future holds the promise that "all the tea in China" will again be an impressive amount, indeed.