It’s boom or bust for all the tea in China

FIRST it was property, then the stock exchange. Now, a rare tea is at the centre of the latest asset bubble in China, that looks set to burst.

Like fine wine and malt whisky, fermented Pu’er tea improves with age. While a cake of two-year-old Ye Sheng Gucha tea sells for around £20, the 13-year-old fetches £130. And with prices rising by as much as 50 per cent a year, Pu’er is becoming a far better cellaring option than Bordeaux wine.

The fermented tea from south-western Yunnan province is famed for its rich flavour and medicinal qualities of lowering cholesterol and preventing cancer. It is also said to help in losing weight.

“The price changes have been really serious,” said Hua Meiling who runs a tea-shop on Shanghai’s Taikang road. “People have been talking about it like the stock market.”

Investors in Hong Kong and neighbouring Guangdong province first started buying the tea speculatively in 2003, purchasing large stocks to tighten supply. Recently, 500g of a 64-year-old Pu’er tea sold at auction for £70,000.

But now, nearly all the old tea has been sold and the speculation has hit younger teas. “The increases in the last year have all been for teas produced after 2004,” said Yang Zonglei, who runs a Pu’er tea shop on Maoming road in Shanghai.

According to shop owners, prices for two-year-old Pu’er tea sold in Shanghai increased by about 20 per cent last year. But in Beijing, some varieties of Pu’er have doubled in price over the last two years. And in Guangdong, the price of big brand Pu’er reached a peak in May at 20 times higher than last year’s price.

“Most Shanghainese don’t really know about Pu’er,” said Yang. “There hasn’t been the same hype here, so the prices have been more stable.”

Though popular in Guangdong province and Hong Kong, Pu’er has only recently become a hit in the North, partly thanks to a televised caravan journey from Yunnan to Beijing by actor and director Zhang Guoli. He took a supply of the tea with him during the six-month journey, giving it time to ferment in the traditional manner.

But now interest is coming from abroad. Baffled Shanghai tea sellers report strings of Taiwanese customers buying up their stock of what they call “bargain-priced” Pu’er.

“We haven’t changed the price of our Pu’er since we opened two years ago,” said a saleswoman at Zhenchalin tea shop in Taikang road. “In the past week I’ve had four different Taiwanese customers coming in to buy it.”

And since Victoria Beckham revealed that drinking Pu’er is one of her “slimming secrets”, several UK importers have also got in on the game. One web-based retailer, Eternal Spring, emphasises the tea’s investment potential, offering to buy back any unused tea at a return of 10 per cent a year.

But it has not just been increasing demand that has sent prices rocketing. Last month, supply was knocked after an earthquake measuring 6.4 on the Richter scale caused £125 million damage in the Pu’er region, much of which was to its tea factories. Prices of Pu’er on Beijing’s Maliandao Tea Market went up between 30 to 50 per cent on the news.

Zou Jiaju, secretary-general of the Yunnan tea association, has been playing down the effect that this dent in supply will have to the long-term price of new Pu’er.

“Whether the tea price will rise dramatically again is uncertain at the moment,” he said.

Most analysts agree that the main reason behind the astronomic rises since 2003 is speculation. “The price of Pu’er tea has risen too far from its actual value as a result of hype from business and investors,” Yang Sizhong, a professor at Yunnan University, told the China Daily.

According to independent economist Andy Xie, Puer’s popularity has been driven by China’s new rich, in particular the winners from the recent stock market rally. “You might not link the rising prices of some tea to the stock market. But when the stock market bubble bursts, you will see where the prices of Pu’er tea go,” he said.

The Shanghai stock index, which has more than tripled in two years, underwent a sharp correction at the end of May after the central government tripled the tax on shares transactions. And apart from a blip after the earthquake, prices of Pu’er tea have since then been dropping.

But there are few tea-shop owners who expect the price to keep going down. They are holding on to their stocks until after the summer when demand will surely pick up again.

“It’s too hot to drink Pu’er tea now. People buy green tea in the summer,” said Hua.

CAPTIVATING BREW
THE earliest records of Pu’er tea date back to the Tang Dynasty (618-906).

Because it took weeks to transport the tea leaves to be processed, they would begin to ferment in the humidity and release a strong, fragrant aroma. A special technique of tea fermenting developed, and Pu’er was thus created.

The leaves are collected from growers of a broad-leaf tea tree. They go through two types of fermentation, which gives the tea its unique characteristics; a mild but distinctively earthy flavour. Pu’er requires at least ten years to mature and gets better with age. Pu’er teas are much lower in tannins than other varieties.

This article was taken from: NewsScotman.com