Qingming Festival isn't just a major day on the lunar calendar, with the traditional Chinese festival also marking an important cut-off date for Chinese tea production. Green tea leaves harvested before the festival, which falls on April 4 or 5 each year, fetch far higher prices because they are considered to have gentler, subtler aromas than those harvested post-Qingming Festival.

But this year prices for famed brews, including West Lake Longjing and Biluochun, have slumped significantly amid the nationwide campaign against extravagance and surging production of imitation boutique teas. Instead of ushering in a business boom in tea trading, sales of spring teas have plummeted in the lead up to this year's Qingming Festival.

Spring orders slump

Spring teas are most famously available at Beijing's biggest tea market, Maliandao Tea Market in Haidian district. This year's spring teas went on sale about 20 days earlier than previous years due to warmer weather and abundant rainfall in South China's major tea-producing regions.

Top-quality West Lake Longjing fetched up to 50,000 yuan ($8,044) per 500 grams at auction last year, about 25 percent higher than the previous year. However, this year prices tumbled for the famous Hangzhou brew and other boutique teas by 10 to 20 percent, according to Wang Qing, deputy director of the China Tea Marketing Association (CTMA). Teas produced in Wenzhou, Zhejiang Province, suffered the sharpest drop of 30 percent, Wang added.

Despite spring being one of the busiest periods for tea sales due to high market anticipation, business has been sluggish this year at Maliandao.

Zhang Fuqing, owner of the Beijing Daming Jianlian Trading Company, is usually inundated with early spring tea orders from clients, who include State-owned enterprises, hotels, tea retailers and individual buyers. However, this year only a handful of customers have placed their orders since spring teas went on sale more than a week ago.

"Last year, Longjing tea was sold at 8,000 to 9,000 yuan per 500 grams at my shop. This year's price has dropped to 6,000 to 7,000 yuan," said Zhang.

Zhang says his daily sales on average hit around 1,000 to 2,000 yuan, barely enough to cover rent and other overhead costs. By comparison, last year during the same period he was taking in up to 10,000 yuan daily.

"It is the same situation for other shops at Maliandao," he said. "The overall market at the moment is bleak."

Bucking the costing trend are low- and mid-end teas, which have seen prices climb about 15 percent year-on-year. The hike is attributed to rising labor and production costs along with inflation, according to Zhu Zhonghai, director of the CTMA's information department.

Reasons for falling prices

A major reason for the drop has been the central government's crackdown on extravagance, which has led many government agencies and State-owned enterprises to scale back top-end tea consumption.

A civil servant from Chaoyang district, who declined to give her name or government department, said her work unit's previous custom of buying high-end teas for more senior government agencies during Chinese New Year has come to an end.

"Boutique tea is beyond the consumption capability of average people. Only large government organizations and enterprises can afford it," she noted.  

But Sun Danwei, general manager of Beijing's Wuyutai Tea Shop, said the new regulations were only a minor factor in bringing down boutique tea prices.

"It is normal for tea prices to change every season. Tea prices by and large are subjected to market fluctuations due to production costs," said Sun, who said the 126-year-old company she heads has seen firm spring tea sales.

Demand has also cooled for Chinese tea overseas, with last year's exports sliding 2.8 percent year-on-year amid weaker demand from the EU and Japan, the Xinhua News Agency reported.

Zhu acknowledged boutique tea sales had suffered in the drive for frugality, but said problems within the tea industry also contributed to falling prices.

"In recent years, there has been increased output from other regions producing tea that rival famed luxury tea brands. This has caused luxury tea prices to drop," said Zhu.

For example, only tea produced in Hangzhou, Zhejiang Province, can be labeled as Longjing tea. Yet due to a lack of proper industry regulation, teas produced in neighboring areas have also been sold under the same label by rogue tea makers. 

Need for industry reforms

A production surge of imitation boutique teas has driven prices down as reputable tea makers struggle to compete, said Zhu, adding that stricter industry regulation was the only solution to the problem.

Another problem is that conflicting standards in certain tea-producing regions have been set by the Agriculture and Environmental Protection ministries and the State Administration for Industry and Commerce, Zhu said. The lack of a national, unified standard in tea labeling has caused consumer confusion and allowed unfair market practices to thrive, he added.

A further reason for the price drop is harvest surpluses of boutique teas due to favorable weather conditions during harvest time for spring teas, which begins in March. However, low sales have led tea retailers to order less from wholesalers like Zhang, causing a bottleneck in production.

"Some of our clients still have 50 kilograms of tea in stock from last year, therefore it is unlikely for them to buy large quantities," Zhang said. 

Despite bleak business for many tea companies, Zhu said the price drop served as a warning sign for many of China's small-scale tea manufacturers.

Currently, there are more than 70,000 tea companies nationwide, yet only 300 to 400 are reputable brands. Within this group, there are only a dozen or so large-scale tea giants, most of which are State-owned companies, such as the Zhejiang Tea Group and the Hunan Tea Group.

Many tea companies rely on high-end teas to drive profits, although the sustainability of this business model has been questioned.

Zhu advised tea makers to turn their sights away from the narrow luxury market and tap the market driven by "ordinary consumers," particularly young tea drinkers.