From the Managing Editor's Desk
Dan Bolton,STiR managing editor
China beckons. The bluster that accompanies trade wars and the rattle of sabers in the South China Sea are distractions created by government not commerce. The people of China are eager to get down to business and coffee presents tremendous opportunities in their domestic market and abroad.
Each year China must create 20 million new jobs for a population nearing 1.4 billion. These jobs no longer come from state-owned enterprises (SOEs) that have drained the public coffer and polluted skies. High-growth small and medium-sized enterprises (SMEs), many family-owned, disproportionately (75%) contribute to job creation. In the US SMEs account for 65% of net new jobs and in Germany these firms (known as the Mittelstand) account for more than half the country’s output. Coffee production globally is dominated by small businesses.
Since the adoption last year of a five-year plan to encourage small-business growth, China has registered an astounding 12,000 new business ventures a day. SMEs now account for 68% of export volume and 50% of taxes paid. The country hopes to tap into the same innovation, energy, and private financing that make modern economies resilient.
A government mandate to elevate the earnings of people outside the major urban areas has rained blessings on Yunnan, a largely rural province of 43 million in southwest China. The first coffee trees in the late 19th century and were planted there by French missionaries.
Yunnan’s cool high-altitude climate and availability of water, favorable rainfall and farming expertise developed over centuries of growing tea, make this region ideal for planting arabica.
Modern Chinese coffee cultivation began in 1988 when the Chinese government, the World Bank, and the United Nations initiated a program to plant coffee in Yunnan. Relaxed land use policies make it possible to establish large tracts of contract farms planted mainly in catimor (a hybrid of Caturra and Timor). Nestle established domestic production soon after liberalization of the economy and Starbucks popularized cafe culture, operating 3,000 coffee shops. Commercial farms took hold and now produce 95% of China’s coffee (most of which is consumed domestically). Initially, large coffee companies provided farmers with seedlings and guaranteed a price for ripe cherry processed at corporate mills. Favorable conditions have more recently shifted the focus to specialty-grade coffee which has traded since 2016 at the Yunnan Coffee Exchange (YCE) in the city of Pu’er.
YCE is constructing a large industrial park to mill and finish specialty grades for export. Chongqing, at the intersection of the Jialing and Yangtze Rivers, is the exchange designated for trading commercial grades of coffee which now total more than 2.6 million 60-kilo bags. This city of 16 million is a rail hub leading west with direct service to Europe and one of four provincial-level cities directly administered by the central government.
China is now the 12th largest coffee producer in the world and the 7th largest producer of arabica. The country has readied itself for a grand entrance at the Specialty Coffee Association’s annual conference and deserves a warm welcome.