Wine column for the week of 31 August 2015

Reliable facts and figures about China are notoriously difficult to find in that country, but what is without question is that China is now a major player in the wine world. This is not just because Bordeaux en primeur prices went mad by the time of the 2009 and 2010 vintages, led by mainland interest, or because China is now believed to be the largest consumer of red wine in the world.

China is now the fifth largest wine producer in the world – a production level significant enough to allay fears that increasing Chinese wine consumption would cause a world wine shortage.

Does this level of domestic production threaten the volume of imports on which countries from France to Australia to Chile so heavily depend? Marcus Ford, owner of Pudao Wines in Shanghai, says the rapid growth in wine production is a state-backed initiative “so there will always be a delicate balance between the two”. He adds that overall consumption is increasing in both domestic and international categories.

Lau Chi Sun, publisher of the Chinese-language magazine Wine Now Monthly, says the issue may be the other way around, because although wine consumers across continents tend to favour local wine, imported wine may be a threat to the demand for domestically produced wine.

Hong Kong-based winemaker Tersina Shieh, who has done vintages at Silver Heights in Ningxia Province and Treaty Port in Yantai, agrees. She sees a tranche of problems in the domestic industry. She doubts that local government “vineyard corridors” are in the most suitable places for grape production and notes a lot of problems in vineyards. “Diseased vines, inappropriate viticultural practices, lack of yield control, unsuitable grapes varieties – and so on.”

Pricing is also a problem. China has some good domestic wines which could be exported, but the prices are too high. “They only make sense in the domestic market because of a 49 per cent tariff on imported wines,” explains Ford. “The producers here claim that the cost of production is high due to many different factors. If you take the example of Ningxia, the wines have to be buried in winter then excavated in spring. This is manual work, and very expensive and time-consuming.”

Pricing is also an issue at entry-level. They are not cheap enough to compete with entry-level wines from countries like Spain and Chile, says Shieh. Ford raises the additional problem of poor quality. “This needs to be fixed,” he says, “to encourage wine drinking for pleasure as opposed to ritualised consumption.”

Certainly it is only in the past decade that domestic production has been undertaken on any scale, so the industry is still hugely youthful. China has the potential to producer top quality wines, says Lau, but it takes time. “There is a saying in the wine world that making wine is easy: the most difficult thing is the first 200 years.”

On the export markets, made-in-China wines also face a serious image problem and it is unusual to find much beyond Hong Kong and Macau. “Fortunately more small wineries making wine of higher quality are starting to gain recognition from the world,” says Lau. These include Silver Heights and Kanaan, and Lau particularly cites Grace Vineyard wines, which have been listed by Cathay Pacific and are now stocked in Selfridges in London.

So wine producers importing into China don’t need to worry any time soon about the overall quality of domestic production, and can take note that consumption is on the rise, particularly in the adventurous 20-30-year-old, middle-class demographic. But other, political, issues are at play.

Baudouin Neirynck, assistant professor at the Institute of Tourism Studies in Macau, is a long-time commentator and researcher on wine in China. He cites the government initiative back in 1996 that table wine should replace rice wine at traditional banquets. This began the dramatic rise in wine consumption and production. But another government initiative, in 2012 – this time an austerity and anti-corruption drive – saw wine production decline by nearly 5 per cent in 2013, with consumption down by 13.7 per cent. This is in a market “accustomed to an annual average growth rate of 16.4 per cent from 2001-2012, he said”. Prices of top-end wines subsequently crashed.

The development of a domestic wine industry is overall a positive force. As Neirynck points out, vines can grow on land unsuitable for any other agriculture, and their planting has helped to prevent further land succumbing to desert conditions and erosion. It is also good news for farmers turning their land over to grape growing. “A whole middle class that did not exist 50 years ago will be supporting this industry that is starting to show very promising talent among young grape growers and winemakers,” Neirynck said.

Words: 788

Categories: China, Not home, wine

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