China's tea industry should make more efforts to improve product quality and foster brand names to see off huge challenges in both domestic and overseas markets.

Domestically, a stricter market access system on food products to be implemented soon is likely to phase out a large proportion of small-scale tea processing enterprises using backward technology and churning out low-quality products.

Overseas, they have to battle stricter technical trade barriers adopted by some big importers of Chinese tea products such as the European Union and Japan.

QS certification

The country is to implement a compulsory certification system for food products by the end of the year, which will introduce stricter measures of supervision in production, quality inspection and sales.

The first batch of compulsory-inspected products covers five categories: tea, meat, milk, drinks and seasoning.

Products passed the certification will be labelled "QS" to show they are "qualified and safe" for consumption.

A recent survey revealed significant problems with quality in these particular types of food.

Of the nation's 20,600 producers of these five products, some 45 per cent are small organizations with fewer than 10 employees, 60 per cent are not covered by food inspection procedures and 10 per cent are operating without licenses.

Of the five categories of food products, tea products are in the most sorry state.

Fewer than 10 per cent of domestic tea producing and processing enterprises would qualify for the QS licences, industry insiders predict, though standards for tea products have not yet been determined.

"Domestic tea producing and processing enterprises which have passed the ISO9000 series of certification are likely to get the QS licenses. However, they account for fewer than 10 per cent of the total, and output of these enterprises accounts only 30-40 per cent of the country's total tea production," said Wu Xiduan, general secretary of the China Tea Marketing Association.

The rest - scattered, small-scale producers - would find it difficult to pass the test, said Wu.

He added that according to the internationally-accepted GMP (good manufacturing practice) certification, most of China's tea producers are not up to the standard.

Trade barriers

As if the woes at home were not enough, China's tea products face the challenges of "green trade barriers" in the global market.

According to customs statistics, China exported 252,300 tons of tea last year, a slight increase of 1.04 per cent over the previous year, while the export value dropped by 2.98 per cent to US$332 million.

The situation is a result of the poor quality of Chinese tea products, according to an official of the Tea branch of the China Chamber of Commerce of Import and Export for Food, Native Produce & Animal By-Products (CFNA), who did not want to be named.

The European Union (EU) and some other major tea-importing countries like Japan are using technical barriers, such as quality standards, to reduce imports from China.

The EU started stricter inspection standards since July 2001. Requirements for the maximum residue limits of some chemicals lowered 200 times, and inspection items increased to 134.

As a result, China's tea exports to the EU last year were only 14,500 tons worth US$25.58 million, a year-on-year decrease of 32.2 per cent and 29 per cent respectively.

Like the EU, Japan, the United States and some other countries have also erected trade barriers to limit China's tea exports and protect their own industry, in the name of ensuring food safety.

Last year, tea exports to Japan, one of the major importers of China's green tea, dropped 19.4 per cent year-on-year to 31,900 tons, while the export value was US$71.7 million, a decrease of 20.62 per cent.

Inspection standards

Wang Xiaobin, an official with the Ministry of Agriculture, said that China's current quality standards concerning pesticide and metallurgical residue need to be modified for success in global trade.

The EU standards with respect to pesticides are several hundred times stricter than China's, though the country's standard on heavy metals is five times higher than the EU's.

The current quality standard on the content of heavy metals, which was set for food inspection in the 1980s, is not suitable for the tea industry, said Su Zhucheng, a professor studying tea industry under the Zhejiang University.

More than 23 per cent of the varieties of tea found in the world are grown in China's countryside but the overseas sales of teas produced in China make up only 6 per cent of the total tea trade.

A way out

To improve the situation in the birthplace of tea and meet the challenges in domestic and global markets, China's tea industry should make more efforts in industrial restructuring, technological innovation, foster big names, and establish a sound market system.

China's tea production and processing centres are quite dispersed, scattered across more than half of the country, Su said, and "technology is still at a poor level and the scale is limited".

The industry employs backward production methods under which the tea is cultivated by households but processed in big factories. Therefore, pesticide residues are hard to control, Su said.

A temporary solution is to find a convenient way to inspect and control pesticide residue to ensure product quality, Su said.

However, Mei Feng, chairman of the China Tea Marketing Association, believes only industrialization of the sector would boost tea production, saying the key problem is the absence of large-scale production and unified management.

Despite being a major producer and having a history of tea drinking spanning thousands of years, China doesn't have a single well-known tea brand on the world market.

While China's Longjing tea is well-known to the world, it is only a variety and not a brand name. Many producers label their products Longjing; and, therefore, quality cannot be ensured.

"Cultivating brands is the key to improve competitiveness in the global market," said Zhu Xianming, a professor in Hunan Agricultural University.

A recent move by Unilever, maker of the popular Lipton-brand black tea, in the Chinese market is likely to push domestic producers to pay more attention to brand building.

The consumer-product giant developed new products - bagged green tea and jasmine tea - with the Lipton brand in May this year; which is expected to lure more young Chinese to drink its bagged teas.

The new products have been selling well in the Chinese market, said Wang Hui of the Unilever China.

Industry experts have said that the move will not dramatically affect the domestic market, since Chinese are accustomed to drink bulk teas, instead of bagged tea.

The trade mechanism in the industry also hinders the industry, especially in exports.

Scattered tea processing enterprises and traders make export costs 20-25 per cent higher, greatly weakening competitiveness in the global market.

Experts have urged the setting up of an auction centre for the industry.

"It's a pity that there is no auction market for tea in China, one of the largest tea producers in the world," sighed Zhang Liming, general secretary of Guangdong Tea Society.

In the international market, 70 per cent of tea products are traded in producing countries' auction markets, where buyers and sellers need to pay only a total of 1 per cent commission for auction agencies, greatly cutting down costs.

The industry's development needs government policy support as high taxes impose a heavy burden on the industry, Mei of the China Tea Marketing Association said.

Tea producers pay 7 per cent of their revenue in agricultural tax, 12 per cent in special product tax and 17 per cent in value-added tax.

He urged the government to cut taxes and increase technical support.

(HK Edition 09/09/2003 page1)