China’s No. 1 Document and Tea Production, 2024
Since China is the world’s largest tea-producing nation, both the 5-Year Plan and the No. 1 Central Document shape the agenda for China’s tea industry in terms of resource allocation and the role of tea in economic development.
THE FIVE-YEAR PLAN
China’s first 5-Year Plan ran from 1953-1957, and 2021 marked the beginning of the 14th 5-Year Plan. Some highlights of the current plan include:
- Economic development. Like the plan before it, a main goal is to further develop domestic supply while also promoting domestic consumption. Initiatives like the Belt and Road Initiative (BRI) will likely impact over 65% of the world’s population and over 40% of global GDP. The flow of trade through the BRI is intended to drive growth and consumption in developing markets. This further aligns with current and previous Plans that aim to eradicate poverty and/or develop rural areas.
- Note: Previous plans have set numeric targets for economic growth as a percentage of GDP. The current plan differs in that it does not. The global pandemic and concerns about China’s massive debt levels are the likely reasons for this omission.
- Global politics and economic trade: tensions have also pushed China to call for greater self-sufficiency in food security, energy, technology, and industry.
- Environmental development: China continues to commit to reducing pollution, including carbon neutrality by 2060.
Since the current Five-Year Plan was released in 2021, the political and economic climate has altered China’s progress along these goals. Some of these more recent factors include:
- Real estate sector woes. Real estate development and investment has accounted for 40-45% of China’s GDP in years past, but unstainable debt and confidence in the system has led to failure and bankruptcy for some major businesses in the sector.
- Exports. China has long relied on exports as a driver for growth, But some international markets have increased talk of “de-risking” their supply chains by decreasing their dependence on China exports.
- Human capital. Economic slowdowns and societal factors have led to increased unemployment for more recent college graduates. Some assessments also point to insufficient skills and training (outside a few world-class Chinese universities) for recent college graduates.
For more information, please see the U.S.-China Economic and Security Review Commission’s 2023 Report to Congress.
THE NO. 1 DOCUMENT
The No. 1 Document is an annual statement of priority in the development of China’s agriculture and rural affairs. For 2024, the document emphasizes:
- Stable food production: This includes management of prices for soybeans, wheat, and rice, but also highlights the need for agricultural infrastructure, upgrading technologies, and modernizing agricultural management systems.
- Improving rural residents’ income and welfare: Efforts in this area will include the further development of community access to medical and educational services and the development of agricultural-related industry.
For more information, see CSIS blog post.
FOR TEA
The concerns and trends expressed in these documents directly impact the Chinese tea industry, especially as they relate to labor and workforce development. Chinese tea production has shifted significantly over the past decades to more rural areas in the Central and Western provinces, areas that are the focus of rural infrastructure development.
However, these rural tea producing areas also face challenges with skilled labor. Tea farms in areas across China will bring in experienced laborers during harvest to assure timely plucking, but this workforce is getting advanced in years with few younger workers available to replace them. Even with the increased volume of youth unemployment, few are willing to take these forms of work in rural areas. Education quality in rural areas also suffered as a result of COVID, so overall skills development in rural areas still pose a threat to rural tea production and management.
China’s domestic consumption of tea, especially RTD, may also increasingly affect pricing and production of tea in rural areas. While still small, the sugar-free segment of China’s RTD beverage market has seen significant growth over the past few years. Anecdotal reports indicated that jasmine flower production levels combined with greater demand from RTD producers resulted in greater difficulty securing jasmine flower for some jasmine green tea applications. For newly established tea production areas with lower skills and less established operations, fannings and lower-grade teas are easier to produce and yet are well suited to the needs of bottled tea manufacture. China has historically consumed about 80-85% of its annual production, and the growing demand for bottled tea may shift the types/grades of tea produced, and/or further limit the amount of tea China exports. This trend potentially benefits the rural farmer and China’s domestic tea consumption, and is therefore worth monitoring.
The Five-Year Plan and No. 1 Document are best known for laying out a vision, or guidelines rather than a detailed plan for action. This approach often means that different provincial and industry sectors take initiative upon themselves to best determine the path towards achieving that vision based on their immediate situations. This approach also fosters a kind of competition, as successful implementation is praised as a model for others to study and emulate.