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Trad & Industry ... ...
    Hot commodity
2005-05-30 06:11

The atmosphere nearly boils over in the auction room as buyers frantically outbid each other for Zhuyeqing, a green tea from Mount E'mei.

The price steeps. Within minutes, three bidders have the awestruck spectators believing the tea is worth thousands of yuan. The bidding climbs to 6,700 yuan (US$809). The initial asking price had been set at 2,500 yuan (US$302).

The auctioneer barks: "6,700 yuan! Will anyone offer a higher price?"

Everybody holds their breath. They watch the three bidders, who appear to be determined to buy the tea, which was freshly picked from Southwest China's Sichuan Province.

You could have heard a pin drop. There is no sound. Nobody flinches. The gavel drops. No 10 is the winning bidder. "Although the price is slightly higher than in the marketplace, it is worth it," says the purchaser, who refuses to be identified.

All the teas on the auction block had been evaluated by some of China's renowned tea specialists, who guaranteed they were of top quality. This year, however, Zhuyeqing tea is rare, which makes it all the more valuable.

The purpose of the auction, held in mid-April by the China Tea Expo organizing committee, was to standardize China's tea-pricing system.

Twenty-eight brands of tea were auctioned off. With the exception of Zhuyeqing and Longjing, which saw its price double from the initial asking price of 1,600 yuan (US$193), the prices of the teas fluctuated very little during the bidding.

"That (the prices didn't rise too much) was exactly what the auction wanted to see," says Gong Shuying, a tea professor with Zhejiang University in Hangzhou, capital of East China's Zhejiang Province. The city is home to Longjing tea.

"We want to give the market and ordinary tea drinkers a price for reference," Gong says.

She was one of the six tea specialists invited by the organizing committee to assess the teas and give a base price, based on 10 kilograms, for each product.

Creating order

While the auction was not the first of its kind in the country, it was widely regarded as China's tea industry's first successful effort towards a standardized pricing system.

"Although China is home to teas, the prices are in disorder," says Zheng Heshan, a senior executive with the China National Native Produce and Animal By-Products Import and Export Corp, which is a major tea trader.

He was responsible for the tea expo and auction.

"An 'auction market' is needed in China to give tea traders reference prices," Zheng says.

In other major tea-producing countries, such as India, Sri Lanka and Kenya, about 60 per cent of tea changes hands at auctions.

To better understand rules and practices of tea auctions, the organizing committee sent a delegation to India, Sri Lanka and Kenya.

"This was the first auction that worked to regulate tea prices in China," Gong says. She speaks highly of that particular tea auction.

In recent years, some tea auctions have been held in China. However, industry analysts say they did little to create a better tea-pricing system, as they generated exaggerated prices.

During the spring tea auction in Shanghai three years ago, 50 grams of top-quality wild Baicha from Anji, in East China's Fujian Province, fetched a shocking 20,500 yuan (US$2,476). Such examples are abundant in China.

However, as a 20-year tea drinker, Wang Jin'an, a 45-year-old Beijing taxi driver, says those auctions did little to give ordinary tea drinkers some rational prices.

"China desperately needs a rationally priced tea market," he says.

Worth the money?

Tea shops line many streets in China's major cities and tea-producing provinces.

In Quanzhou, Fujian Province, home to Tieguanyin oolong tea, it is not uncommon to see 20 tea shops within a 1-kilometre area.

What's more, prices in those shops vary from less than 100 yuan (US$12) yuan to more than 10,000 yuan (US$1,208) per 500 grams. And they only sell Tieguanyin.

Can those Tieguanyin teas, which look so similar, really be as different as their prices indicate?

"Yes," says Chen Shuifu, who has been involved in the tea business, in that city, for more than seven years. He owns a 45-square-metre tea shop.

Tea quality varies greatly. It depends on where the tea is grown, on soil quality, the weather when it is picked and how it is processed.

"However, these factors may not necessarily affect the appearance of the teas," Chen says. "Teas may look exactly the same to inexperienced eyes.

"Even I, myself, may make a wrong judgment."

Given such circumstances, plus the lack of a national standard price, it is inevitable that some buyers may be cheated.

To regulate the market, the General Administration of Quality SupervisionInspection and Quarantine requires 13 categories of food, including tea, be labelled with QS (quality safety) tags. That policy was implemented earlier this year. That means those products must pass quality tests, and the equipment used to produce them must meet national standards.

That helps, but it is unlikely to solve the pricing situation, analysts say.

In China, they add, the threshold for starting a tea shop is very low. Owners of some shops, to generate greater revenues, claim their teas are of a higher quality than they really are.

A private tea shop owner, who declines to give his name, in Beijing's Maliandao market tells China Business Weekly he usually triples his purchasing prices on his mid-range teas. For high-end teas, such as Longjing tea, he generally asks 10 times more than his purchasing price.

"Almost everybody is doing that," he says.

On the other hand, some Chinese consumers believe the higher the price, the better the quality. That creates opportunities for dishonest business people to charge higher prices regardless of their products' quality, suggest industry insiders.

Gong tells China Business Weekly that within the low-end price range, it is usually correct to assume higher prices mean better quality. However, that depends on how honest the shop owners are.

So, she suggests it is safer to buy tea at recognized tea shops, such as Wuyutai and Zhangyiyuan in Beijing.

"Brand names speak volumes, otherwise they wouldn't have survived the market competition," Gong says.

Wang agrees. "The prices in Wuyutai are reasonable, and I do not have to worry about being cheated."

However, to ensure the further development of China's tea industry, "we must establish an auction market," Zheng says. "The sooner, the better."

Adds Gong: "Some industry players have realized the importance of an auction market ... However, to initiate the effort, you need to be financially capable."

The China Tea Marketing Association in 2003 announced its intention to push forward with tea auctions. However, substantial progress has not been made to help reduce pricing irregularities.

With the "successful beginning" of the auction held by the tea expo's organizing committee, Gong says, "it is likely we can establish an effective, and truly functioning, auction market within three to five years."

(China Daily 05/30/2005 page7)


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