In 1996, when then Chinese premier Li Peng praised the health benefits of wine during China’s National People’s Congress, it sent an unmistakable signal to the country’s officials and politically savvy wine merchants: China’s age of wine had come.
That same year, ASC Fine Wines, which would later go on to become China’s biggest wine importer, was created. Wine imports soared; by the end of 2013, the Chinese were drinking more red wine than the French.
That was a generation ago, when China’s wine consumption was not so much about appreciating varietal character but using the liquid, particularly classified Bordeaux, for gifting and to lubricate business meals and banquets.
But the fast rise of wine meant an equally dramatic collapse at the whim of political winds. At the beginning of 2013, Beijing’s new leadership cracked down on luxurious spending and wasteful official banquets; wine sales, particularly of fine wines, dried up. Merchants were stuck with gluts that would take years to deplete.
One of the main impacts of the anti-corruption clampdown is that it accelerated a shift from luxury gifting and prestige-driven wine consumption to more value-driven New World wines. A key beneficiary of this trend is Australia. By the summer of 2019, Australia had overtaken France to become China’s biggest wine supplier, taking up close to 40% market share.
That however did not last long. China slapped a whopping 218% tariff on Australian wines in March 2021, effectively ending Australia’s wine exports to its most profitable market.
There is one thing that is clear about China’s wine market: its boundless promise is matched with equally boundless uncertainty. Although projected to become the world’s second-biggest wine consumer in 2020, China’s ranking in fact slumped from fifth to sixth, a combined result of economic slowdown and pandemic, according to the International Organisation of Vine and Wine's (OIV) latest report on the state of the world viticultural sector in 2020.
Despite Li Peng’s championing of wine back in the 1990s, China’s drinks consumption is still heavily skewed towards baijiu, the ancient grain-based Chinese spirit. Baiju, along with beer, traditional Chinese yellow wine and other spirits, accounts for at least 90% of market share. Post-pandemic, baijiu sales have surged. One explanation is that in uncertain times, consumers lean to what is familiar (baijiu’s origins date back 5000 years).
This is not to say the wine market has no potential. The latest national census shows the country has over 900 million urban residents with high disposable income; there are an estimated 52 million wine drinkers, according to market analyst Wine Intelligence. As Chinese wine consumption moves away from speculative and prestige drinking and becomes more stable as it is taken up by the burgeoning middle class, the wine market size is expected to expand to US$18bn by 2023, up from US$14.8bn in 2018 (Vinexpo and IWSR). China’s vast e-commerce landscape will also have a major role in shaping the future of wine consumption.
It’s worthy to note that Hong Kong, which eliminated wine taxes in 2008, is considered a mature wine market with a large number of experienced wine merchants with specialist knowledge and wine trade experiences. The fine wine trading hub accounts for roughly 60% of global wine and spirits sold at auctions through Sotheby’s, a larger share than London and New York. Across the border in Macau, Portuguese wines remain the most popular wine category thanks to its colonial past. In Taiwan, French wines lead, though wines from the US and Chile are catching up.
Read More at https://www.iwsc.net/news/wine/iwsc-insight-the-chinese-wine-market
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