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The Development and Prospects of the Contemporary Puerh Market By Chen Chih Tung

Chen Chih Tung is one of the leading experts on Puerh tea in the world today. He is a renowned speaker and the author of several prominent books and hundreds of published articles. His latest book "The Profound World of Chi-Tse" has become the academic and market standard for identifying state produced vintage Puerh. It would be difficult to find a Puerh shop in Asia without a Chen Chih Tung book, magazine or poster somewhere amongst the tea.

Besides a few scattered products from the rare private family firms before the "New China", any serious discussion about the history of Puerh production must focus on the China Tea Corporation and the China National Native Produce and Animal By-products Export and Import Corporation (CNNP). These corporations are literally synonymous with the middle stages of Puerh manufacturing - almost all the teas of that era(s) were produced under the banner of one of these two corporations. In the mid 1980's, changes in the relationship between the CNNP and the tea factories would begin to form new currents and eddies in the Puerh tributary, which would eventually lead to sales that would create the milieu for the modern Puerh market.

The Market of the 1990's was an overseas one. At that time, aged Puerh dominated the market and many new Puerh productions were suspended or suppressed. This is very different from the contemporary market. Despite the growing independence of the factories in Yunnan, it's not difficult to understand why the market in the 1990's was still focused on aged tea. These teas were well-aged, considered to be better than new tea of course, and could be appreciated immediately. Inexpensive market prices at that time, increased interest in aged tea in Taiwan. Later, the spread of some epidemics, like SARS at the beginning of 2003 made people more health-conscious. All these factors caused buyers to start taking an interest in aged Puerh tea. This increased interest then caused an escalation in the value of all aged Puerh, and as the prices began to rise, so of course would the interest - and that relationship ultimately created a pulley on which the whole market could be raised.

A lot of aged tea was sold back to China as more Chinese collectors took an interest. This of course would in turn raise prices in Taiwan, Hong Kong, Malaysia and Korea. This trend reached its peak in 2003, setting the stage for the modern Puerh market.

In 2003, the amount of aged Puerh being imported to Mainland China had reached an all-time high. The economy was booming. China had for perhaps the first time developed a middle class with a disposable income. Some of these people had a genuine desire to use their new monies to begin exploring aspects of their culture and art that previous financial and political restraints had made impossible. Puerh tea was on its way to popularity. In 2004 the greatest demand seemed to be for Seven-son Tea Cakes from the 1980's as these Puerh vintages were still available. This great demand raised the prices of 1990's Seven-son Tea Cakes as well, and the vendors holding a stock of those cakes raised prices, predicting that they would eventually follow suit once the 1980's cakes became rarer.

Understanding the aged Puerh market is essential to an overall comprehension of the Puerh world itself, and even a discussion of the modern market must begin there. Typically, investors use three "landmark" tea cakes to measure the entire aged Puerh market: Red Mark (Hong Yin 红印), Yellow Mark (Huang Yin 黄印) and the 7542-901 which generally means the Eighty-eight Raw Tea Cake (a. ka. 88 Qing Bing). These teas, and their price index, are often the signals for changes in the entire market. It is therefore worth while to take a look at the relationship each of these teas has on the modern Puerh market.

Red Mark - the standard for comparing other high-priced well-aged Puerh tea cakes

Red Mark tea cakes were the first product of the China Tea Corporation Yunnan Provincial Branch. They represent the beginning of the state-owned production of Puerh, and that period collectors call the "Masterpiece Era" (1950's-1960's). Red Mark teas are currently the most well-known and coveted vintages of Puerh tea. They also have had the widest circulation over time. Red Mark cakes were always a reference and quality standard for other vintages of Puerh.

Red Mark's price then has become a standard for all Puerh products, whether of the state-owned factories or private family frims. If the price of Red Mark rises, then the other products from that and future eras will also follow suit. The price of Red Mark, consequently, almost always announces a rising tide throughout the whole vintage Puerh market. These waves sometimes shut down the sales of Red Mark too, because buyers refuse to pay such unbelievably high prices. However, sellers are clearly hoping for such rises, and are therefore often unwilling to sell their stock of vintage tea because they feel that their profit will increase beyond the current value. Market analysis has shown conclusively that there is usually a direct correlation between the price of Red Mark arid the entire price index of vintage tea. As the graph on the next page shows, there has been a steady increase in the value of Red Mark since the 1990's. And this has then affected the tendencies of the entire Pucrh market.

The first real raise in price occurred in 1999. From 2000 to 2002 there was only one slight adjustment in price, mostly concentrated in Taiwan, because the natural disasters that occurred during those years slowed the development of the Puerh market down. The report of "Poisonous Puerh" in One Weekly froze the market entirely for a short period of time. Little by little the market began improving, starting in 2003, but the SARS epidemic had then reached a crisis point in Taiwan and the market was again held down. After the storm of SARS had cleared up, Red Mark started its second climb - a trend which has continued until the present time. Actually, one could take out the price details for Red Mark and the above chart would also accurately graph the demand of the entire Puerh market. Since 2003, more and more Mainland Chinese participation has led to a vast expansion of the market and an exponential growth in the price index. The Price of Red Mark in the market conclusively impacts the psychology of buyers and sellers throughout the entire vintage and newborn markets. Therefore, Red Mark is of such a leading importance. In fact, owning a large amount of the Red Mark is a sure-fired way to influence the entire market. It is like the helmsman, steering the ship "Puerh" on towards its future destinations.

Yellow Mark - highest standard of mid-stage vintage Puerh tea

Of the Puerh produced at the end of the Masterpiece Era and beginning of the Seven-sons Era, none is more renowned or popular than Yellow Mark (Huang Yin 黄印). No tea occupies as important or influential a position in the market as Red Mark, but Yellow Mark comes the closest. The price of Yellow Mark is an adequate gauge of the Seven-son tea cake market itself. Many market analysts use Yellow Mark to determine and predict the price index of all Seven-son tea cakes. When the price of Red Mark rises, the price of Yellow Mark will drop relatively lower. This then draws the attention of connoisseurs. Consequently, the market price of Yellow Mark is indicative of all the tea cakes from the Seven-son Era.

Yellow Mark tea cakes were the main export of the CNNP in the Seven-sons Era. Before the CNNP was established, some slightly Fermented Yellow Mark Round tea cakes had already been produced, but they weren't such important products for exportation, as their later counterparts would become. Yellow Mark Seven-son cakes began to be exported in 1972 (at the beginning of the Seven-sons Era).

There are two great differences between teas that we call "Seven-son Tea Cakes", and "Masterpiece Tea Cakes". Firstly, the corporations that produced these two kinds of Pureh were different. Masterpiece Puerh teas were made by the China Tea Corporation Yunnan Provincial Branch and Seven-son tea cakes were produced by the CNNP, also their Yunnan Tea Branch. Secondly, most of the Masterpiece Puerh vintages were produced prior to 1970.

Price adjustments for Yellow Mark almost always follow that of Red Mark. However, the price index of all the Puerh produced in the Seven-sons Era, viz. 1970's to 1990's, are affected directly by the price of Yellow Mark. Some other important Puerh vintages from that period such as the Green Mark Junior and Zhongcha Brand Simplified Chinese Characters Seven-son Tea Cakes, etc. will also affect the market, though not as much. Calculating the price index of all these Seven-son tea cakes requires an understanding of where the Yellow Mark is in relation to the overall market. This explains why the Yellow Mark is so important.

7542-901 (Eighty-eight Raw Tea Cake) - A bridge between the 1980's and 1990's

7542-901 is a remarkable tea cake, connecting two decades. It is a product of the late 1980's. More importantly, though, is its distinction from the later Seven-son tea cakes produced since 1993. Due to the similarities of most all the printing plates of the 1980's and early 90's, it is not easy to differentiate the tea cakes produced during this period. It wasn't until 1993 that the printing plates of Seven-son tea cakes altered enough to distinguish the stages between these tea cakes. The photos on the next page show the differences between these two kinds of printing plates. The prices of the tea cakes, which were made before the alteration, have risen dramatically and then all the others from that period can be determined by their price index relatively. Therefore, identifying and knowing the price of the Eighty-eight Raw Tea Cake will give one a clear understanding of the price index for all 1980's Puerh. In fact, the differences in prices within this era are all calculated based on their quality and age with reference to the Eighty-eight Raw Tea Cake. This is unusual because the price index of a decade is usually determined by its earliest representative. Also, since the early 1990's Seven-son tea cakes are not easily differentiated from the 1980's ones, their price is almost always included in this same index, so knowing the value of the Eighty-eight Raw Tea Cake will also help in the analysis of those cakes.

The recent climb in the prices of the Eighty-eight Raw Tea Cake clearly shows that the aforementioned interest in this era of tea has steadily increased. This is important because raising the price index of late 1980's tea cakes will also affect the entire index of 1990‘s tea cakes. Sellers see the rise in the 1980's and early 90s tea cakes and consequently raise the prices of 1994-2000 teas also, predicting a similar increase in investment capital. The rise in price of the Eighty-eight Raw Tea Cake has often adjusted the entire price index of tea cakes produced in the 1980's and early 1990's. As mentioned above, the price of the other vintages will all be determined in a quality comparison against the Eighty-eight Raw Tea Cake, so the lowest offered price of 7542-901 in any given fiscal period is a very important number for all tea cakes from the Seven-son Era; and that stage in turn directly affects the outcome of the late 1990's teas.

Many experts predict that in the coming years, at the end of the 2000-2010 decade, we will see the greatest rise in the mid to late 1990's teas. They are predicting this change based firstly on the huge increase in demand that has occurred in the 1980's and early 1990's tea cakes, making them rarer and more difficult to find. Secondly, they see the dramatic rise in price of the Eighty-eight Raw Tea Cake and know that it signifies a change in the mid to late 1990's teas; and finally, another important factor is that ripe Puerh was the main production before the mid 1.990's. This means that raw Puerh from this period is already rarer to begin with. Accordingly, it is assumed that the teas from the mid to late 1990's will soon have an explosion in price that will perhaps disconnect them from their association with the price index of the 1980's and early 1990's teas, and also the Eighty-eight Raw Tea Cake.


2002 was an important year for many markets. China was starting to really boom, and the tea market there was creating a substantial demand for aged teas, especially Seven-sons tea cakes. The fact that most of these aged Seven-son tea cakes were produced by Menghai, Xiaguan and Kunming tea factories lent them a kind of cultural historicity that many Chinese investors were seeking. The higher the prices of these aged Seven-son tea cakes, the more buyers were willing to stockpile the latest products from these three main tea factories for their presumed future appreciation in value.

The modern market

The current Puerh market is very different from the Masterpiece or Seven-sons eras. Of the many variations, three seem to stand out strikingly: firstly, the Masterpiece and Seven-sons teas were manufactured under the "Planned-economy Period". We call it this because all aspects of the processing, producion and distribution of the teas made by the three most important factories (mentioned above) were all controlled by either jthe China Tea Corporation before 1972 or the CNNP after 1972. However, relaxation in laws and economy has resulted in the privatization of these factories, as well as tea vendors, who may well. The second major difference between these eras and modern production is one of amount. The popularity of Puerh tea has led to an amazing increase in productivity in just the last few years alone. The Puerh produced long ago, like Red or Yellow Mark for example, were made in quantities that would make modern factory managers chuckle. This perhaps lends to their value. Finally, during mast all of the Masterpiece and Seven-sons eras, the factories had their eyes set on foreign markets. Exportation represented the vast majority of their interests. However, the current economic development in China has led all the pre-existent factories, as well as the new ones, to focus on the domestic market. Therefore, the future development of the Puerh tea market will rely on the economic highway of Mainland China. The market of Puerh raw material will also depends on domestic inflation and demand.

Bottlenecks in the market

The current market has expanded so much that the whole market ecology has changed. The huge boom in Puerh popularity within China has caused two major bottlenecks in the market: one in the available supply and the other in the manner of distribution, marketing and sales.

The increase in supply has been in part due to the inclusion of all the new factories in Yunnan, competing with the existing ones. In the long term, this makes it more difficult to get raw material. And in order to meet the efficiency standards of these new modern factories, with modern machinery, the supply of raw material cannot be decreased for any one of them. This, of course, causes a whirlwind in the price index of raw material, as all the factories compete for their very survival. Also, the increased production has stressed the natural ecology of the tea farms in Yunnan in ways never before experienced. Many are worried that the over-harvesting of wild trees, which is occurring en masse, will seriously damage the environment and ultimately result in the exhaustion of all quality raw material. The threat of destruction only adds more suspense to the competition and the resulting bottleneck in the market. This bottleneck is unavoidable. The larger and more established factories, with entrenched access to raw material, will perhaps maintain a superior position forever, and many weaker factories will probably close down. Only products of poor quality and/or imitations will be able to flow through the bottleneck smoothly, so we can also predict an increase in these two kinds of tea circulating in the market. In addition, this bottleneck will increase the risk of future investment by limiting the choices available to agents and distributors.

The second bottleneck, which occurs in the sales and marketing of Puerh tea, is directly linked to the Vintage Puerh market discussed above. The fact that the three famous factories, Menghai, Xiaguan and Kunming, have a tradition and historical connection to the great products of the Masterpiece and Seven-sons eras gives them an advantage in the current market. Producing a modern 7542, no matter what raw material is used, gives this product a huge advantage over any other product, even if the raw material happened to be the same. Menghai's price index, and its recent increase, directly affects the price index of Xiaguan products, and these two factories then will shake up the entire market. The quick and dramatic rise in prices that has occurred recently reflects more enthusiasm in Puerh tea, but the sharp rise cannot continue forever. Eventually, the prices will surpass the average income of people in China. Then, it will not be affordable anymore.

Currently, most of the competition in the market occurs at two levels of sales and there is a bottleneck at both. The greater competition occurs between the agents and distributors that are doing the wholesaling because they often buy regardless of what is happening in the retail market. They often intend to store some quantity of the tea anyway, hoping that the value will appreciate. However, market analysts and collectors can't ignore the retail market. If prices exceed this market and enthusiasm begins to calm down, this decrease will eventually affect the first tier of sales, too. Furthermore, any drop in prices will cause all kinds of anxiety for both tiers: If, for example, people can no longer afford tea for consumption and it is only purchasable as a product to be stored with expectations of appreciation in value, will as many people take a risk? Also, the increase in demand will only cause producers to continue expanding to balance the supply, which increases, circulation and decreases value.

Another anxiety investors will face is related to the fact that some of the private tea factories may begin to get a foothold in the market, breaking open this bottleneck; or perhaps teas from another region in China will compete with the price index of Puerh with the same results.

Until quite recently there really weren't any young teas of five or more years that had been produced by these new private factories. Many of these teas couldn't be appreciated yet, so there really wasn't any way to see if any of the private companies had a chance of affecting the bottlenecks mentioned above. But now some of these products - as they get more mature - are becoming popular, and changing the way collectors view the Puerh market. In small steps, many of these private factories are indeed breaking through the barriers created by the established factories. The most obvious example is the 1999 Yichang Hao produced by the Changtai Tea Company (now Changtai Tea Factory), which has always attracted the attention of consumers and collectors alike. The constantly rising price of this cake, as well as the growth of its manufacturer, have released important elements into the market stream; perhaps changing the future of Puerh tea forever. For one, this success announced that products from private factories do have the ability to compete in the market. It also was a statement that products from other factories, beyond Menghai and Xiaguan, can be of great quality and can in fact age in the way the famous tea cakes from the Masterpiece and Seven-sons eras have. As long as products from private factories have a high quality standard they can affect the market, especially when taken together as a whole.

The future market

No one can say with certainty if the Puerh market is a bubble waiting to pop, but it often appears that way. Much of the enthusiasm and investment in Puerh tea is not as a demand for tea that will be consumed. Many people are buying with expectation of financial return. It's difficult to say how long such a demand can go on. Furthermore, as discussed above, the supply of good quality Puerh tea is also threatened. If the supply and demand construct of the market changes can the market digest the new prices? Especially if they are set by those who have bought up and then stored all this tea? These are important questions for the future of the Puerh market.

I see four important changes coming in the future: Firstly, producers will set fire to long-term competition and many small manufacturers will be eliminated. Secondly, products will continue exploding in variety and quantity and will end the era of the monotonous standard. We will have a great varity of choices in the future and this will form a customer-orientated Puerh tea market. Also, there must eventually come a period of consumption when all the teas that are being stored for investment, which represents the majority, reach maturity and start being consumed. At that time the market will change drastically. Finally, I predict more competition from the smaller, private companies. We will see more of them finding a foothold and growing up the way Changtai did. This will change the way the market operates.

The future of Puerh tea isn't bleak. Even if the markets crash there will always be connoisseurs, as there were before Puerh became so popular. Many of the smaller producers are interested in environmental friendly agriculture, quality over quantity and other wholesome business practices. However, the liberal restrictions and growing competition in the market means that it will take some time for the Puerh world to sort itself out. As more and more of the Newborn Era tea cakes start to age a little and reach the consumers interested in actually drinking the tea, more clear evaluations will begin to be circulated. This will continue more and more and the coming decades will afford us plenty of opportunity to appraise all these teas now in storage. So many of ns are waiting with pen and paper, a cup and an empty Gaiwan.