Man with a mission – The Chinese who broke the foreign monopoly of tea

5 February 2016

From the early 19th century, China’s most important export was tea. The profits from this lucrative business went to foreign companies backed by their global networks and the military might of their governments. Little of the profit went to the Chinese.

The man who broke this monopoly was a native of Xiangshan (now Zhongshan) county that borders Macao. In 1916, Tang Qiao-qing established Hua Cha (Chinese Tea), the country’s first tea export company. He signed an agreement with Carter Macy, one of the best-known importers in the US, and exported 80,000 crates in its most successful year, 1925.

Hua Cha exceeded expectations of the Chinese by competing successfully with powerful trading firms like Jardine Matheson, Butterfield and Swire and Dent and Company.

The brand, which Hua Cha exported to the US, won first prize at the Sesqui-Centennial International Exposition of 1926 in Philadelphia, a world fair to celebrate 150 years of independence from Britain.

Early life

Tang was born in 1841, the second of four sons of a poor rural family in Tangjiawan, now part of Zhuhai. Following multiple births, his mother died at an early age, leaving his father to raise the four boys on his own. Tang was only able to study for a few years before having to help his father work on the farm. Life was very hard.

His father decided that he would have a better future in Shanghai, where relatives and friends could help him find a career; so, when he was 14, he went on his own to China’s largest and most prosperous city. There he met Tang Jing-xing, a relative from Tangjiawan who was working in the customs bureau; he found a job for him in a tea company.

Starting at the bottom was hard work, studying the operations of the tea shops and accompanying colleagues on purchase visits to tea-producing areas. He studied English and learnt all aspects of the tea trade, earning him the respect of his superiors. Tang Jing-xing introduced him to tea merchants and compradors of foreign trading firms. He later found a job as a comprador with a foreign company.

Building his own empire

Tang’s knowledge and connections served him well and his income increased. Seeing the strong growth in demand and the opportunities this presented, he resigned from his salaried post in 1867 and set up his own business, the Qian Xun An tea company, in Jiujiang; he opened branches of it in Hankou and Shanghai. In 1868, with Tang Jing-xing and Xu Run, he set up the Shanghai Tea Company; the three served as directors. He became one of the richest tea traders in Shanghai.

Production was concentrated in the south and east of China. Farmers sold their leaf to Chinese firms such as those owned by Tang or to compradors acting for the foreign companies. The terms of trade were biased against the farmer and in favour of the purchasers; for them, it was a lucrative business.

The money Tang earned enabled him to diversify into other sectors. He invested in the Renjihe Insurance Company, which between 1876 and 1886 built up a capital of one million taels; it had several major shareholders, including compradors of foreign banks. In 1883, he and two partners invested in the Chezhou coalmine in Anhui. In 1888, with two partners, he invested in a real estate firm in Shanghai. He also invested in finance companies in Shanghai and Hong Kong with other people from Tangjiawan.

Competition from India

China’s defeat in the two Opium Wars had brought radical changes to the tea industry. The opening of treaty ports brought a rush of foreign trading companies; by 1864, 68 of them had established offices in Shanghai, mainly British and American. One of their most important commodities was tea, especially black tea, which they exported from China to London, from where it was distributed to other markets. With the opening of the Suez Canal in 1869, the journey time to London was reduced from 127 to 58 days, cutting the price and making the business even more profitable. The habit of tea drinking spread to the US, continental Europe and the Middle East. Considered healthier than cola or coffee, it became known as the king of the world’s three major drinks.

Before 1834, China had produced the vast majority of tea traded in the world, including that imported to Britain. Eager to end this dependence on a single market, the East India Company began to cultivate tea in the northeast Indian state of Assam; in 1839, the first auction of Assam tea took place in Britain. The British greatly expanded production in India and Ceylon, now Sri Lanka; by 1888, British tea imports from India for the first time surpassed those from China. Consumption in Britain soared; by 1901, it exceeded six pounds per person, compared to less than two pounds 50 years earlier.

Tea – with milk and sugar added – had become part of the British way of life. During the two world wars, the government took over the import of this commodity because it judged the brew essential for the morale of the troops and the general public.

Foreign firms dominate exports

The wealth created by this explosion of global demand remained largely in the pockets of the foreign firms who monopolised the export of tea. Chinese firms did not understand overseas markets, had no direct links with importers in those markets, were inexperienced in shipping and foreign exchange and did not have the qualified personnel they needed. They could not compete with their foreign rivals.

Many Chinese entrepreneurs proposed that Chinese firms should export directly, to break the foreign monopoly and retain more of the high profit margin within China. But none could do it.

Breaking the monopoly

The breaking of the monopoly became the last great mission of Tang’s life. In 1916, at the age of 75, he established the Hua Cha company in Shanghai as China’s first tea export firm. In association with other prominent tea traders, Tang raised 100,000 yuan in capital; he ran the firm with two of his sons, including Tang Ji-shan, his youngest son and 16th child.

His father had sent him as a boy to Britain, where he learnt English, received his education and studied the tea trade. He returned to Shanghai in 1916, where his father appointed him general manager of the new firm. Tang senior merged his companies in Hankou and Jiujiang into Hua Cha and set up its headquarters at number 16 Museum Road, in the city. It had branches in Hong Kong and the US.

In its first move into the export market, the company sold two brands of tea bags to San Francisco where it distributed them through Chinese-owned department stores; they were in bags of one pound, 0.5 pounds and 0.25 pounds. But Liptons dominated the market for black tea and Japanese brands the market for green tea. Without proper advertising and promotion, the two brands did not sell. After three years, the bags were broken and the broken tea sold for a bargain price. The company suffered a big loss and learnt a bitter lesson.

Undeterred, the Tangs invested a further 80,000 yuan in a new factory in the Zhabei district of Shanghai which they equipped with imported machines; they bought leaf directly from growers, to reduce costs to the middlemen. They launched two new brands ‘Tian Tan’ (Altar of Heaven) and ‘Chang Cheng‘ (Great Wall) and secured long-term financial help from the Hong Kong and Shanghai Bank.

Business improved. In 1923, they re-organised the firm into a shareholding company with an additional 100,000 yuan in capital; the Tang family held a stake of 80 percent. They modernised the operations with new packaging and better quality and varieties. Despite his advanced age, Tang Senior threw all his energy and fortune into the new venture.

To penetrate the US market, the firm had to stop relying on Chinese companies there and join the mainstream. In 1924, it signed an agreement with Carter Macy, a large and well-established US tea importer which had previously bought from British trading houses.

Its best year was 1925, helped by a piece of good fortune. On 30 May that year, Chinese and Sikh policemen under British command in Shanghai opened fire on a crowd of 1,500 to 2,000 protestors, killing nine and injuring many, of whom 15 were sent to hospital. The incident provoked a national uproar and a strike for three months by the city’s dockworkers who refused to load cargoes onto foreign-owned ships. This was a godsend to Hua Cha, whose shipments were not affected. It used wooden barges in Suzhou Creek to bring the crates to large vessels in the Yangtze River estuary. Carter Macy set up an office in Shanghai to establish the brands which it bought solely from Hua Cha; it helped with the promotion and marketing.

In 1925, Hua Cha exported 80,000 crates, or 2,500 tonnes, of tea; it was the highest volume during the history of the company. That year Tang died of illness in Shanghai, aged 84; he had lived to see his dream fulfilled and the monopoly of the foreign firms broken.

Film celebrities

Tang Jishan invested some of his earnings in the film industry and became a media celebrity. To promote his tea, he took Chinese film actress Zhang Zhi-yun with him to the US. Company advertisements proclaimed him as the ‘Emperor of China’s tea’ and Zhang as the ‘Empress of Chinese tea.’

From May to November 1926, Philadelphia held a Sesqui-Centennial International Exposition, to celebrate 150 years of independence. Hua Cha won a first prize for the tea it displayed at the Expo.

In the 1930s, Hua Cha’s exports averaged 60,000 crates or 1,900 tonnes a year, accounting for 10-18 percent of tea exports from Shanghai and ranking the company the fourth largest in its field. This earned Tang Ji-shan the title of ‘the King of Tea’.

Destruction

The Japanese invasion was a catastrophe for the company. In January 1932, its factory and warehouse in the Zhabei district of Shanghai were completely destroyed by Japanese bombing and artillery. The firm had sufficient goodwill from clients and banks to remain in business and find the money to rebuild its facilities. But the facilities were destroyed again during the Sino-Japanese battle of Shanghai in 1937. The Japanese took over the city.

After World War Two, the company re-opened in 1946 and exported a limited amount; but it was short of capital and equipment. Before 1949, Tang Ji-shan moved to Hong Kong and later to Taiwan. In 1950, the company’s exports were only 169 tonnes. The company in the mainland was nationalised by the new government.

Family and charity

Tang Qiao-qing had 16 children, of whom seven died young. Of the nine who survived, four studied in the US. Number 11, Tang Shu-ban, served as Chinese consul in Luzon in the Philippines; he later worked with his father and younger brother as deputy general manager of the Hua Cha Company.

Tang Qiao-qing was active in public works. He helped to found an association for Guangdong people in Shanghai and gave financial help to the Ren Ji hospital; he also funded the Gezhi College and Yinghua College in the city and gave financial help to poor, uneducated students.

In Xiangshan, he founded schools, helped the poor and bought a small steamer, which made regular journeys, carrying goods and passengers to and from the district to Hong Kong.

(In the autumn of 2014, Joint Publishing of Hong Kong published The Second Tang Dynasty – the 12 sons of Fragrant Mountain who changed China. One of them was Tang Qiao-qing. The English version appeared first and a Chinese one will follow.)

(By Louise do Rosário in Macao)

MACAUHUB FRENCH