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Wealthy Chinese consumers drive up price of luxury tea leaves

© Dreamstime Tea Plantations at WuYiShan(WuYi Mountain), a famous Oolong tea producing area. Nanping city, Fujian province, China

By Tom Hancock in Wuyishan, China, The Financial Times

The surging price of oolong tea grown in eastern China’s Wuyi mountain range has transformed the fortunes of local farmers such as Chen Jingxi, who says he will earn the equivalent of more than $1 million this year from sales of rare roasted leaves.

Chen’s tea brand has increased in price from Rmb108,000 ($16,000) per kilogram to Rmb125,000 in the past year — giving him an annual income close to Rmb8m, which he spends on renovating his three-storey house, built with floors of marble tiles and rooms of mahogany furniture.

[post_ads]Average prices for tea grown amid winding river valleys of Wuyi, in the north of Fujian province, have been growing at 10 percent annually for the past decade, according to local farmers, due to rising demand for luxury tea from wealthy entrepreneurs.

But this year price rises have accelerated to 20 percent due to a campaign by local officials to destroy illegally planted tea bushes, reflecting a general trend of increased environmental enforcement affecting commodity prices.

Enforcers armed with hoes have ripped up 1,000 hectares of bushes — 10 percent of the local tea-growing area — since last year. At least 15 people have also been detained in a campaign to safeguard biodiversity around Wuyi, which includes the Wuyishan — Mount Wuyi — Unesco-designated world heritage site, enforcing a 2008 ban on new planting that had been mostly ignored.

“The government has stepped up environmental management, which has reduced production, and there is more demand for our teas,” said Chen Zhen, a dealer who sells Wuyi tea priced at almost Rmb100,000 per kg. “Production cannot keep up with demand.”

Mr Chen attributed local officials’ new-found environmental zeal to a speech by China’s president Xi Jinping in 2017 stating that “Green mountains and clear water are worth mountains of gold and silver."

The spike in tea prices from tighter enforcement of environmental regulations has been mirrored by other commodities, including cement, fertilizer and steel. Prices surged this year as the ruling Communist party toughened punishments for officials who fail to meet ecological targets.

Even activists say enforcement has improved. “We are observing ... enhanced accountability that the party attaches to the environmental performance of local cadres,” said Li Shuo, a Greenpeace campaigner. “Some of the external costs now may be factored in and will drive up prices.”

Tea has been grown in the Wuyi mountains for centuries. British botanist  Robert Fortune stole plants from the region in the 1840s and transported them to Darjeeling, essentially founding the Indian tea industry.

Dahongpao, or “Big Red Robe”, is the most coveted variety of Wuyi tea, grown from trees which trace their ancestry to the 16th century. Only six original Dahongpao bushes remain and have not been picked for a decade, due to their age. As a result, prices for 20 grams of tea from those bushes reached Rmb200,000 at auction — a sum equivalent to about 24 ounces of gold.

The boom in the price of Wuyi teas began a decade ago, when wealthy business owners began to covet it for its taste, but also because of its exclusivity, said Mr Chen, whose tea is related to Dahongpao. “If a tea is selling for more than Rmb30,000 per kg, it’s a matter of culture, like a Louis Vuitton bag,” he said.

Lesser known varieties of tea have also benefited from the boom. A variety known as Niurou that sold for Rmb3,000 per kg a decade ago now sells for almost Rmb10,000, implying an annual increase of more than 10 percent. Annual production is limited to 500 kilograms.

That has created a windfall for a few thousand farmers who have ancestral land holdings inside the government-designated park area, where the best tea is thought to be grown.

China is the third-largest consumer of black tea, brewing up 300,000 tons in 2017, behind India’s 1 million tons and Turkey’s with 320,000 tons, according to the UN’s Food and Agriculture Organisation.

Tea production around Wuyi will be worth Rmb4bn by 2020, according to officials. “We need to thank people from the big cities for paying so much,” said another farmer, Zhou Fang, who has opened a high-end clothing store with her earnings.

During the peak picking season in early May farmers work through the night to dry the tea and roast it in barrels, a process that gives the leaves a distinctive woody flavour. Rising local wealth means that almost all the pickers are itinerant workers from other provinces, who earn less than Rmb200 a day.
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“Men don’t want to work for such little money,” said Tian Liang, who was picking leaves perched on a wooden ladder on a terraced hill in the grounds of a Buddhist monastery. Plasters covered several cuts on her hands.

China has experienced bubbles in the price of high-end tea before, most notably Pu’er grown in the south-western province of Yunnan, which saw yearly doubling in price for a decade before a sharp decline in 2007.

But farmers in Wuyi say that the natural limits on supply of the best Wuyi teas, which can only be grown inside the nature reserve, mean the price rises are sustainable.

“The main thing is that Wuyi’s core production areas have very little output, which makes the tea a relatively scarce product,” said Zheng Decheng, co-owner of a brand of Wuyi tea. “The audience for these teas has grown, but the output has not increased, so the price will surely go up.”

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