China's tea industry in transition. (state role diminishes)

Like the rest of the economy, which has been transformed at great speed from a sluggish command-style system to one where market forces and international competition play an increasingly greater role in its operation, the Chinese tea industry has experienced great changes over the past decade.

Ten years ago, the tea industry was subject to a variety of price and production controls by the ministries and departments which were responsible for its operation. That the administrative management of the industry was not totally ineffective can be seen by the enormous advances made since the early 1970's in the expansion of area, and increases in national output, and export volumes.

However, by the mid 1980's the Chinese authorities decreed that productivity increases in land and labor were no longer possible under the old collective system, and that personal incentives were necessary to take the agricultural sector out of the rut into which it had appeared to fall. The fact that the problems of the sector as a whole were not necessarily experienced by the tea industry was either not appreciated or overlooked.

Since 1978, the production and marketing systems of the tea industry have been overhauled, the role of the state greatly reduced particularly in the purchase and sales of tea, and tea farmers left more to their own devices in contriving strategies to grow and market the crop.

This is not to say the Chinese government has withdrawn completely from the industry. In terms of the provision of production inputs, the supply of funds to purchase and sell the crop, management of processing factories, and the purchase and sale of exports, the authorities, whether at the national, provincial, or lower levels in the administrative hierarchy, still play a powerful and sometimes crucial role in the operation of the tea industry.

In fact, government intervention in the tea industry rates high by the current standards of an increasingly deregulated Chinese economy. Because of the importance of hard currency earnings…