One Belt, One Road is a Two-Way Street

PUER, Yunnan

A cobblestone trail and a map carved in stone mark the first outpost on the 3,000-kilometer ancient Tea Horse Road. It was from here that for more than 1,000 years caravans carrying tea started their journey of many months crossing Yunnan, Sichuan, and Guizhou provinces to Tibet and destinations as far as India, Nepal, and the Middle East. China has renewed interest in this route with a modern initiative known as One Belt, One Road (OBOR) linking destinations as far as Hamburg, Germany, and London to the heartland of Chinese tea. The initiative makes available $4 trillion for infrastructure and connectivity enhancement in 68 countries that are home to more than 65 percent of the world’s population. China grows more tea than any other country and consumes one-third of the world’s tea, with steady increases in per capita consumption of green tea and a growing population. China is a major exporter with $1.5 billion in annual sales, but less well known is the country’s growing thirst for tea grown elsewhere. Last week, the government of India and the city of Shanghai hosted a delegation of 100 Chinese tea importers interested in trading tea. With all the tea in China at their disposal, the sessions seem outwardly unnecessary, but China’s youth has developed a fascination with black tea. Exports from India rose by 2.8 million kilos in 2017. China invented black tea and makes large quantities of its own Yunnan Black and Quimen, but those are expensive, handmade teas. The recent popularity of black tea is driven by “western style” blends with fruits and floral inclusions and the great surge of interest in milk teas. “Younger segments of the population are also showing a preference for black tea over green tea (black tea consumption has risen by an average of 40 percent per year since 2002, while green tea consumption has risen more gradually), which should bolster demand for black tea, albeit from a low base,” according to The Economist Intelligence Unit. A cup of milk tea can contain a meal’s worth of calories and caffeine equivalent to eight cans of Red Bull. Hong Kong style lai cha shops “are enjoying strong growth potential in China that’s improving living standards and evolving lifestyles,” Jason Yu, general manager of market research firm Kantar Worldpanel told the South China Morning Post. The Post reported that in 2016, “two thirds of consumers in China spent money on freshly made drinks, including coffee and milk tea, according to Kantar Worldpanel, which tracked consumers aged 15–49 in 27 major mainland cities.” The United Nations Food and Agriculture Organization (FAO) is projecting an average annual growth rate of 15 percent per year through 2024 for tea in China. Average tea consumption is just over 1 kilo per year, well below the rates in many western and Middle Eastern countries, which are led by Ireland and Turkey. China ranks 14th globally in per capita consumption. Market research suggests that only 35% of the population regularly drink tea. Asian countries earned $4.3 billion exporting tea in 2016, accounting for 65.5 percent of the $6.5 billion global total. China earned a significant $1.5 billion (22.8 percent) of exports. Volumes are typically higher as a percentage of total exports in producing countries such as Kenya, and tea comprises a great deal more of Sri Lanka’s total foreign earnings, but neither has the domestic potential of China. America is a small player in the tea export market, accounting for 2.5 percent of global sales, but there appears to be an outsized opportunity developing. Among the 15 largest tea exporters, the fastest-growing since 2012 were: Japan (up 69.1 percent), United Arab Emirates (up 61.9 percent), United States (up 46.9 percent), and China (up 42.5 percent). Two-way street The One Belt, One Road initiative (OBOR) has taken an interesting turn since it was first proposed by Chinese president Xi Jinping in 2013. Originally conceived to favorably influence China’s role in global trade by improving rail, port, and highways for the massive $4 trillion export market, China is now viewed as a free-trade champion and the United States is withdrawing from trade treaties and busy erecting protectionist barriers. In 2016, Chinese imports totaled $1.59 trillion. OBOR is becoming a two-way street. The growing wealth of the middle class has created a demand for value-added teas in sachets from foreign lands with a tea tradition different than traditional Chinese tea. Starbucks, for example, reports a 40 percent increase in sales of its “tea re-imagined” blends at 3,000 Chinese locations. These hand-shaken, iced teas contain fruit (grapefruit) and flavoring (peach) that are routine for Americans but exotic overseas. The simple fact that the tea is served cold is a novelty. China International Import Expo Last May, during the Belt and Road Forum for International Cooperation, President Xi Jinping announced that China will hold its inaugural International Import Expo in November 2018. Shanghai was chosen for the event and the World Trade Organization and United Nations Conference on Trade and Development are listed as primary supporters. Tea is a small segment of the $110.65 billion the Chinese spend importing food and agricultural products, but several tea-producing countries are already showing interest including Sri Lanka, Kenya, and India. The expo is Nov. 5–10 at the National Exhibition and Convention Center, the world’s largest indoor exhibition center with 16 massive halls and 60 conference rooms. The event is expected to attract 150,000 foreign professionals. Expect at least a few of these vendors successfully selling tea to China.                                    t EMBED: www.neccsh.com Top Tea Exporters

1. China: US$1.5 billion (22.8% of total tea exports)
2. Sri Lanka: $1.3 billion (19.2%)
3. Kenya: $680.6 million (10.4%)
4. India: $661.7 million (10.1%)
5. United Arab Emirates: $287.9 million (4.4%)
6. Germany: $232.7 million (3.6%)
7. Poland: $194.4 million (3%)
8. United Kingdom: $136.5 million (2.1%)
9. United States: $127.7 million (2%)
10. Indonesia: $113.1 million (1.7%)
11. Japan: $108.9 million (1.7%)
12. Vietnam: $104.1 million (1.6%)
13. Argentina: $97 million (1.5%)
14. Netherlands: $85.9 million (1.3%)
15. Belgium: $83.1 million (1.3%)

The listed 15 countries shipped 86.7% of global tea exports in 2016 by value. Credit: World’s Top Exports