Tainted green tea was found in the city's major tea markets this week.
The staple product originated in Zhejiang Province and the tea leaves were dyed to create a greener, fresher look.
At tea markets including Datong Tea Market near Shanghai Railway Station and Jiuxing Tea Market in Minhang District, several retailers are selling the shoddy tea secretly.
According to the tea market administrators, leaves that have been tampered with were also found in the city in previous years.
"Green tea that enters the market in summer is a bit overgrown and normally looks grayish," said the manager of Datong Tea Market surnamed Ye. "It doesn't taste as good as the tea in the spring."
He said if the leaves look fresher it can be sold at higher prices. Most of the dealers who sell fake tea are unlicensed.
"The member shops in our market won't sell tainted tea," Ye said. "We inspect them regularly and confiscate inferior goods if any are found."
Nonetheless tea connoisseurs need not worry. Hu Shunling, director of the Shanghai Tea Association, said the dyed tea represents only a tiny proportion of tea on the market.
"It often happens with Biluochun (a traditional green tea grown in Zhejiang) since its leaves are small and it's hard to notice if it has been dyed."
Hu also said normal leaf tips are whitish while dyed tea leaves are entirely green.