“Sir,—In view of the opening of the Tea season in China, a few remarks upon the present position and future prospects of this important trade may not be inopportune.
“It is no secret that for some years past the losses of merchants have been serious, and that while most of the wealthy firms so long known as connected with China have either entirely ceased to import Tea, or have reduced their operations to a very small compass, the trade has been carried on by new houses possessing but little capital, who are enabled, by the competition of the banks, to do a large business by drawing bills on China, not only for the whole cost of the Teas purchased, but also for their commissions on these purchases—that is to say, for an unrivalled profit of 3 per cent. The question, Who has so far paid the losses of the past two years? is one that greatly exercises the minds of the trade. Many suppose that large balances are being carried over in the books of some of the banks, or by the Chinese, and that it is the hope of recouping a portion of this loss that induces the banks or the Chinamen to support those who would otherwise be obliged to relinquish the trade. The Chinese have also a further inducement to support such firms, since it is partly through them that those high prices are established in China at the opening of the season which entail so much loss afterwards. As a result of these prices, about 30 per cent. more fine Congou is produced than (on account of the competition of the Indian growth) can be consumed except at the price of medium Tea. How large the excess is may be gathered from the fact that, although 5,000,000 lbs. of this class of Tea was lost last July in the ‘Moskwa’ and the ‘Fleurs Castle,’ yet stocks in Russia have increased by about 30,000 half-chests, and there is still so large a quantity on this market that it can only be realized at a loss of from 5d. to 6d. per lb. on the China cost; thus some Teas, said to have cost in Hankow 1s. 8d. to 1s. 9d., have been recently sold as low as 1s. 3d., and others costing 1s. 7d. in Foochow, have been sold at 1s. 1d. per lb.
“It is evident from the above that merchants as a rule do not realize the immense change that has been brought about in the conditions of the trade by the enormous increase in the use of Indian Tea, which now forms about one-third of the entire home consumption, and competes mostly with the finer qualities of China congou; nor the fact that all engaged in the trade are becoming year by year more averse to holding stock on account of the heavy charges involved, and the risk of deterioration in quality. Yet, as the whole twelve months’ supply of first crop Tea arrives within three months of the opening of the season, it is plain that some one must hold the balance, which can only be done with safety if the Tea be bought at a very low price.
“The one remedy for the present condition of things is that the great bulk of the so-called fine Teas should be bought in China at their present value on this market—viz., at about 5d. to 6d. below the prices given for them in recent years. With the large accumulated stocks in Russia, and consequently reduced orders from that country, the yearly-increasing supply of Indian Tea, and the present prices here, one would think that such a course would at once be adopted. Unfortunately, however, so much of the Tea is bought on commission, and the Russian agents seem so reckless as to the prices which they give, that any such prudent action can hardly be hoped for. It would, therefore, be wise for holders of shares in Eastern banks, as well as all who have been in the habit of intrusting orders to buying agents in China, to ponder the foregoing facts, which can be easily verified by a reference to any of the trade circulars lest their money should be lost in the crash which must certainly take place if the past policy of Tea buyers in China be continued.—I am, &c.,
“A. B.”
Will those warned be wise in time, and not swamp the Home Market with China Teas certain to be sold at a loss? Who can say? But “A. B.” is evidently master of the subject, and if his advice in not taken, the China Tea “crash” he predicts will not be a small one.
When China Teas are not sent home to realise a certain loss, our Indian Teas will have fairer play.
I cannot conclude without acknowledging the great help I have derived from the pages of the Tea Gazette in writing these additions to my Fourth Edition.
Since my remarks on Ceylon were printed, I have acquired much further information regarding the Tea industry in that island, and the prospects certainly seem very favourable. Anyhow, there seems to be no doubt that Ceylon for Tea offers quite as good a field as any part of India, always supposing that good sites are selected and the area to choose from is large.