DAN'S WINE BLOG- CHINA'S CONTINUED DEMISE

Friday, February 12, 2020

Despite their current five year plan (yes, they still have those) calling for the doubling of the acreage of grape vines planted, China’s actual wine production fell for the fifth year in a row, in 2020. The volume produced was 413 million litres of wine down from 451 million in 2019 and staggeringly down from 1,161 million litres in 2015. That is a mind blowing 64% drop in wine production over this period!! It is a bigger drop in output than if one were to remove all of the South Australian and Tasmanian wine production from Australia’s wine production figures.

Despite the official line that the reductions are a “realignment” of sourcing by their mega wine corporations such as the state owned, Great Wall Winery, and their largest wine company, Changyu Pioneer Wine Company, and that smaller premium producers are in fact increasing their production of premium quality Chinese wine, it is a catastrophic failure for their wine industry. At the same time wine imports into China dropped by 20% in value and nearly 30% in volume, so no matter how you look at the situation, all is not ‘rosy’ with wine in China.

Knowing this, it comes as no surprise that the Chinese Communist Government levied punitive, protectionist taxes on Australian wine late last year after we became the No.1 imported wine country for the first time (surpassing the French). The real surprise is that they did not raise the same or similar taxes on French, Spanish and Italian wines at the same time in an attempt to stop the haemorrhaging of their wine industry. One can only presume that this is because the association that raised the “dumping” complaint has 212 Chinese alcohol producers in its membership, including all the major Chinese wine companies, which in turn have a strong degree of French involvement in them. Be it technical advisors, shareholders or board members.

This has led to a very uneven playing field from which Australian wine will not be able to recover in the foreseeable future, as the likelihood of these punitive taxes being reduced are, in my opinion, almost non-existent.

Meanwhile the Chinese super premium wine push is being led by wineries such as Xige Estate, in the Ningxia region. Xige Estate is a US$45 million winery built in 2017 that has high ambitions of competing directly against Penfolds in the Chinese market. While there are now a few Chinese red wines which are retailing for around/over the AU$1,000 mark per bottle, they struggle to produce the same level of quality as Australia, France and other quality wine producers due to their shorter growing season in most areas.

In many growing areas such as Ningxia the vintners have to bury their vines under soil for the winter in order to prevent them from being killed by the severe frosts. This leads to no ‘old vines’ as after around 15-20 years the trunks snap off and also wines with higher malic acid (bitterness & greenness) content than is generally acceptable in super premium wines.

So whilst our Aussie winemakers are looking for other markets to export their wines to (sales to China in the last quarter of 2020 plummeted by 98%) consider that perhaps the ‘wine bubble’ in China is in the process of bursting.

Have a great week and remember to #chooseaustralianwine and #emergingvarieties

Cheers!