World Market & Chinese Tea Industry since the 18th Century

Abstract

Since the mid-19th century, China's tea industry rapidly collapsed from its position of international market dominance into comprehensive and irreversible decline. Shi Tao's The World Tea Market and China's Tea Industry Since Modern Times offers a valuable exploration of cutting-edge questions surrounding international competition, economic laws, political-business relations, and price mechanisms, drawing on new perspectives and newly discovered historical materials. Modern China's tea industry was squeezed by international competition, state politics, and economic forces from multiple directions, with Shanxi merchants the primary actors in the tea trade never managing to effectively transmit or distribute profits through the supply chain. Before the mid-19th century, Sino-foreign trade served the Qing government's border-pacification policy, and tea exchange was conducted primarily to sustain diplomatic relationships rather than for commercial gain; the disconnect between production and sales left domestic tea merchants with little bargaining power. After the mid-19th century, the adulterated tea problem in the China-US trade caused China to forfeit the opportunity to create a virtuous "price-quality" cycle driven by seller-side demand. In the Sino-Russian Kyakhta trade, by contrast, Russia leveraged China's strong demand for furs to achieve industrial upgrading. Unable to participate in the division of profits within the world market, the distribution of profits along the domestic supply chain became even more obstructed. Tea merchants held production monopolies but remained under strict government control. More critically, merchant profit margins and capital accumulation never generated positive stimulus for domestic employment, labor productivity, capital investment, or technological innovation. Instead, merchants transferred costs outside their organizations through cartel arrangements, perpetuating the poverty of the tea farmers at the bottom of the chain. Finally, from the standpoint of a relative static analysis of the world market and China's tea industry, the ideal approach to economic history research requires both inductive reasoning grounded in historical perspective and logical abstraction from an economic perspective and the two must maintain overall consistency between logic and history.