The  Price  of  Tea  in  China?

 

-- from Bids and Offers, The Wall Street Journal, July 22, 2005, --Compiled by Gene Colter with contributions from Susanne Craig and John Hechinger.

Today's newspaper is replete with coverage of the yuan currency revaluation, but the Bid & Offers crew, being completists, thought it best to ask: "What does this have to do with the price of tea in China?"

First, an editor put the question to a Federal Reserve Bank of New York official whom he was talking to about another matter. (The editor did this because he is what his mother likes to call a wisenheimer.) The sharp-witted Fedster didn't miss a beat: He noted that there was an automatic 2% price change.

Yes. The yuan's revaluation, such as it is, could conceivably affect the price of the conglomerate food companies that buy Chinese tea in bulk for export, because they buy on such "fine margins," notes Sebastian Beckwith, co-founder of In Pursuit of Tea, a Brooklyn, N.Y., company dedicated to bringing quality teas, often from remote areas, to U.S. consumers. (Completists they be, too).

Mr. Beckwith spends several months a year in Asia sourcing tea. In China, he deals with small farms and even individual gardens, and a yuan here or there isn't going to change his price points much.

What matters more to Mr. Beckwith is the Chinese infrastructure: "It's easier to get in and do business, but it's still difficult to travel [and] communications are difficult," he says.

And therein lies a larger message about the Chinese currency policy, one that's echoed by economists: Even if China does move beyond this small step and lets its currency really float, cultural and political differences that affect trade with that country will remain.