“Why is Lipton more powerful than 70,000 Chinese tea companies?” lamented a recent article in a Beijing newspaper.

　　The challenges facing China’s tea industry are the same as those facing a host of Chinese industries: product quality issues; excessive competition in the domestic market; low prices and meagre earnings abroad; and weak branding.

　　The root cause of these weaknesses is simple: extreme market fragmentation.

　　The problem begins on the tea plantations. Around 8m farmers work on plantations across the tea-growing areas of central, southern and western China, mostly tending tiny household plots. Consolidation of the land into larger plantations is constrained by China’s land laws, which prevent farmers from owning – and therefore selling