Cheers to China

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ANASTASIIA ILINA discusses the potential of China’s emerging wine industry.

The Chinese wine market has made a swift  surge in recent years, with areas such as Ningxia claiming to be “China’s Bordeaux,” after the acclaimed French wine-producing region. Given China’s ambition to become a world-recognized wine producer, the question emerges: how much of a threat  does China pose to the world’s leading wine producers and exporters?

Strictly speaking, China has only been in the wine market for about thirty years–a relatively short period compared to the history of winemaking in leading exporter countries such as France, Chile and Australia. Over these thirty years, China’s wine consumption increased steadily. According to a report by the International Organization of Vine and Wine, China is now the fifth largest wine consumer. In 2015 alone, China’s wine imports rose by 44%, in line with the fact that Chinese consumers prefer imported wines. In the meantime, Chinese  wine producers have been struggling to compete in both the domestic and foreign markets.

Conditions for growing grapes are not the issue, for many parts of China offer favorable environments  for the production of high-quality wine. Furthermore, the amount of land China has dedicated to wine production is significantly larger than that of France. China’s wine-producing regions are vast and dispersed,  mostly scattered in rural areas. Among the leading provinces are Ningxia, which accounts for a quarter of China’s wine-producing land, Shandong, Shanxi and Xinjiang.

However, a vast wine-producing area does not guarantee high efficiency and productivity. Research published by Demei Li, associate professor of Wine Tasting and Enology in Beijing Agriculture University reveals that, compared to France, which has 800,000 hectares  of land dedicated to wine with 90% of it utilized for wine grapes, China has 867,000 hectares of land dedicated to wine only 10% utilized for wine grapes, leaving the larger part of them untouched.

At the root of the issue are perhaps the lack of brand recognition and the opacity in China’s wine production process. “There is a huge gap of trust with the consumer that must be bridged before they will feel comfortable buying a China wine,” commented Gao Yuan, CEO of Silver Heights in China. The reason behind this gap, Gao explained, is the general perception of Chinese goods abroad as being fake, low-quality and even dangerous.

For this reason, China’s wine exports remain stagnant. The International Organization of Vine and Wine shows that Chinese exports are below one million hectoliter, which is much lower than leading exporters such as France, which exports over fifteen million hectoliters per year, and Chile, which exports between six and seven million hectoliters per year. Further compounding China’s wine export hurdles is a 27% federal tax on wine exports.

In spite of the challenges, China’s wine industry has had a notable impact on the economies of wine-producing regions. In addition to the growing number of new brands in the wine business, the industry is also attracting inflows of labor and capital. For instance, Alexa Boulton, an American currently working in the Silver Heights winery of Yinchuan, came to the region in November of 2015. Considering that Ningxia is one of the poorest regions in China, Boulton said, “supporting the wine industry is a cornerstone of the anti-poverty measures the government has to develop local industry. Thus, if you go to visit these remote wineries, you will see wonderful new roads and irrigation systems, newly planted trees and plants (to combat desertification), and hotels and museums dedicated to wine tourism”. As Boulton indicates, China’s wine industry has strong government backing, which bodes well for its future. As a foreigner initially skeptical about China’s wine industry, Boulton was both surprised and impressed when she visited Yinchuan and discovered the region’s winemaking facilities and potential of the region.

Ningxia may be a singular example of China’s promise in the wine industry but the region’s rapid development marks progress in an area that may eventually prove integral to China’s global exports.

Anastasiia Ilina is a Masters student at the Yenching Academy at Peking University. Contact her at anastassia_a_ilyina@hotmail.com.

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