VITeff Veille

China

6th rank globally in terms of planting area and wine production.

A Fledgling market but a promising one

Chinese vineyards:

• 353,000 hectares of vines.
  
• 3.93 million hectolitres of production.
  
• 3 zones of production: Gulf of Boahi, Hebei and Xinjiang Province.
  
• Vine varieties: cabernet sauvignon, cabernet franc, merlot, chardonnay, riesling gris, Italian riesling, Ugni blanc.
  
• Vine areas are distributed over small plantations.
  
• 500 Chinese wine producers including around ten boasting of an annual production capacity higher than 100,000 hl.
  
• 4 big producers (accounting for 60 % of the Chinese production): Changyu, Great Wall, Tonghua and Dynasty (Sino-French joint venture). It may be noted that Dynasty (in which Rémy Cointreau holds 26 % of the capital) will be investing 40 million euros for increasing its production capacity from 50,000 tonnes to 70,000 tonnes by end 2008, by expanding its installations and by buying off competitors. It also plans to develop its sales network. Other producers such as Suntime, Zangmi, etc... are rapidly developing their market share.
  
• It may be noted that the French offer in terms of vine-plants, processing equipment and cooperage is of great interest to Chinese companies.
  
  Wine consumption
  
  
• Continuously progressing ever since the end of the 90’s. 85 % of the wine consumed is locally produced.
  
  
• A majority of Chinese consumers appreciate red wines (68 %), followed by mild red wines (23 %), dry white wines (8 %) and others (1 %).
  
  Legislation
  
  
• Subsequent to its entry into the WTO, China lowered its customs duties on wine: they moved from 34.4 % ad valorem in 2002 to 14 % as of today. Consumption tax is 10 % and the VAT is 17 %.
  
• Recent institution of declaration of production and sales volumes and redefinition of the labelling rules.
  
• Standards on wine are being finalised and will come into force in 2006.
  
• Since 1st January 2006, labelling in Chinese is mandatory for foreign wines and spirits. Indications mentioning the qualitative specificities of the product, its origin, its dates and its manufacturing process must be given in Chinese. A sell-by date has also been imposed.
  
• Hong Kong: the Finance Minister has announced a decrease by half of custom taxes on alcoholic beverages. The tax on wine has therefore shifted from 80 % to 40 % in 2007.
  
  The sparkling wine market
  
  
• The production of sparkling wines is still modest in volume. Estimated at 1,600 tonnes in 2004. Held for the major part by the big producers.
  
• The sparkling wines segment has become highly competitive owing to this local production of sparkling wine.
  
• The sparkling wine market remains limited as compared to the still wine market. Most of the sparkling wines consumed in China are locally produced. These are in general inexpensive products, available in 1.5 litre bottles.
  
• France remains the leader insofar as the imported wines are concerned: 67 % of the market share in volume and 86 % in value for the sparkling wines in 2005. Champagne is witnessing rapid growth.
  
• The Chinese sparkling wines market, very young and highly limited in scope, has a tendency to combine the sparkling wines of all types (local wines, prosecco, Californian...) with champagnes. Hence the numerous usurpations of appellations in the distribution channels. Defence of intellectual property is a real issue in China.
  
• It may be noted that France has entered into an agreement of cooperation with the Chinese Government and is participating in the creation of a vineyard in the Peking region. China is a promising market. The awareness of the Chinese about wine will develop. In the coming years, the competition will focus on the high quality products segment. There is a real need for vine-growing and wine-producing equipment.
  
  Development potential
  
• Vine plantations have greatly increased in the course of the last 10 years. The compliance and quality of the production is nearing international standards.
  
• The Chinese market and its great potential are attracting a number of huge foreign producers. Chinese wines are being increasingly competed against.
  
• This competition by foreign wines will induce an evolution in 2006, of the production channel and the pricing system in order to be better equipped to meet the onslaught of the foreign products.
  
  Languages used: Chinese (Mandarin, Cantonese), English.
  
  Sources: E Letter Vinimarket - May 2005 and E Letter Vitisphere dated 23/12/2005 + economic mission Peking February 2006