DAN'S WINE BLOG- MORE CHINA NEWS

Friday, July 9, 2021

This week, more about China as the situation keeps evolving.

French winemakers are nervously waiting to see what the Communist Chinese Government’s reaction is to the fact that French parliament passed a unanimous resolution supporting Taiwan’s participation in global organisations including the WHO.?Given how severely Australian wine was punished due to the Australian Government calling for a full investigation into Covid-19, the French winemakers probably have good cause to be very nervous indeed.

For the last century, until 2019, France was the biggest exporter of wine to China. Then briefly before being banished, Australia took the mantle, then it fell back upon France. It is almost impossible to calculate what the true export figures are due to the pandemic and other factors, however, the French wine sales to China are somewhere between the equivalent of $1.25 and $1.75 billion Australian dollars, which, like it did for us, would represent a massive loss to the French wine industry.

This, at a time when China is massively pushing its own wine industry to its population. As reported earlier, President Xi Jinping visited Ningxia and is pushing for the Chinese to drink Chinese wine rather than imported wine. To this end the, “People’s Government of the Ningxia Hui Autonomous Region”, in May published that it is aiming to have 100,000 hectares of vineyards, producing 600 million bottles of wine by 2035 – which would be more than what all of China is currently producing.

The report outlines a strategy of?“building a modern wine industry with higher product quality, stronger core competitiveness, wider brand influence, deeper industrial integration, greater efforts to open to the outside world and better ecological environment”.

So what does this all mean??Well if the Chinese Government react to the French the way they did to us, China will have lost (between Australia and France) 60-70% of its wine imports. Yes, smaller exporters will rush in to fill the void, but they will struggle to supply the volume of wines that are acceptable to the more savvy Chinese wine drinkers. You can almost hear the Chinese bureaucrat’s thinking – “we will fill the gap with Chinese wine”. Well no, that won’t happen – given that the local industry has seen a reduction in production and sales of nearly 50% in the last five years. Yes, some drinkers will switch over to local wines, but given the inherent mistrust in local products, it is much more likely that they will switch back to beer or Moutai, which have a proven track record.

If this were to happen, it would be an even bigger disaster for the Australian wine industry, because all of a sudden we would have desperado French wineries competing more fiercely with us in all of our remaining markets. Whilst we can confidently compete with the French wine industry (as we did in China) on a quality and value basis, there would be a significant chance that either the French Government or the European Government (or both) would provide these wineries with substantial support benefits (ironically what the Chinese accused us of) allowing them to undercut us in many markets. Both these governments have in the past spent considerable funds (including on the distillation of grapes), in order to prop up the French wine industry, so it is very likely that they would do the same in this case.

Therefore, let us hope that the Chinese Government does not react to the French-Taiwan endorsement in their usual manner, so as to give us a better chance of establishing/re-establishing our wine exports in other markets around the world, without having unfair competition from our arch-rivals. It is a big enough and hard enough task for the Australian wine industry without having the decks stacked in favour of the French at the same time.

Cheers and fingers crossed on this one!

Remember?#chooseaustralianwine?and where possible enjoy?#emergingvarieties?so as to help secure the future of the Australian wine industry.