A County in China Sees Its Fortunes in Tea Leaves Until a Bubble Bursts

An article written in the NY Times January 16, 2009 speaks about the collapse of southwest China’s Pu’er tea market.

Visit article here.

Tea factory in Menghai County

Pu’er is an fermented tea touted as having the ability to reduce cholesterol and cure hangovers, as well as having a number of other health benefits. From 1999 to 2007, its price increased tenfold befold sinking well below its pre-boom numbers. It has been a lesson in gullibility, greed and the risks of speculative trading. A group of manipulative tea buyers and connoisseurs took over the market and drove the prices to astronomical levels, sometimes paying up to 30% more for the “drinkable gold” than in the previous year. When the stock values hit record levels last spring, the buyers unloaded them, took the money and disappeared.

Menghai County farmers were among the worst hit by this crash, many having never experienced the level of success and prosperity available in other cities in China. They built new homes, equipped with t.v.s and refrigerators; and sent their children away to good schools. They bought cars and designer-label clothes.

Chen Li, a trader who jumped into the business three years ago, now survives by offsetting his losses with profits from a restaurant his family owns in Alabama. He does remain one of the few optimists in town. He’s confident that Pu’er’s prices will eventually rebound now that so many farmers have stopped picking.  And the mounds of unsold tea that nearly engulf him?

“The best thing about Pu’er,” he said with a showman’s smile, “is that the longer you keep it, the more valuable it gets.”

Do you share Mr. Chen’s optimism?