YA'AN, China (Reuters) - China's national treasure, the giant panda, will become even more precious if one businessman succeeds in using their dung to grow organic green tea he intends to sell for over $200 a cup.

An Yanshi, an entrepreneur in southwest China, grows the tea in mountainous Ya'an in Sichuan province using tons of excrement from panda bears living at nearby breeding centers.

The first batch of panda dung tea will be sold in lots of 50 grams that will cost some 22,000 yuan ($3,500) each, a price An said makes it the world's most expensive tea. Most people use about 3 grams of tea per cup.

An defended the steep price, saying he would channel profits from the initial batches into an environmental fund. Future batches would be cheaper, he added.

"I thank heaven and earth for blessing us with this environmental panda tea," the 41-year-old former teacher and journalist said at a weekend event to promote the tea.

"I just want to convey to the people of the world the message of turning waste into something useful, and the culture of recycling and using organic fertilizers."

Dressed in a panda suit to promote his tea, An invited a dozen or so guests to help hand-pick the first batch of tea at his plantation at the weekend.

The fertilizer made the tea a health boon, An said, because pandas only eat wild bamboo and absorb only a fraction of the nutrients in their food.

And pandas make plenty of fertilizer.

"They are like a machine that is churning out organic fertilizer." An said. "They keep eating and they keep producing feces."

"Also, they absorb less than 30 percent of the nutrition from the food, and that means more than 70 percent of the nutrients are passed out in their feces."

After brewing the first pickings, An described the tea as fragrant and smooth. Some of his guests, however, were not impressed.

"It's sold at such a sky-high price, perhaps this is just hype," said 49-year-old Li Ximing. ($1 = 6.3227 Chinese yuan)

(Ediiting by Chris Buckley and Miral Fahmy)