The biddies take a look at the Chinese love of red wine from Bordeaux, how and when they started buying top bottles from this French region, and also learn about how wealthy Chinese are buying French chateaux and producing French wine specifically for the Chinese market. Then they take a look at one of the fastest growing wine countries in the world: also China, and dive into its wine regions and production.

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Study Notes:

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  • China now has around 52 million wine drinkers with a total population of 1.44 billion

HISTORY

  • China has made rice wine for thousands of years
    • Unsure of first rice wine made but we know it was popular during the Shang Dynasty (1750-1100 BCE) because of all of the wine vessels buried with people
  • During the Han Dynasty (206 BCE – 220 CE), grape cultivation and wine production first emerged
  • Even though wine was made, it wasn’t a major part of Chinese history
    • During Han and Tang dynasties, wines mainly appeared in poems about conquering the west or were introduced to monarchs out of curiosity or during banquets
  • It was not until 1892 that the first modern Chinese winery was established – Chinese diplomat Zhang Bishi imported vines from the US and Europe to launch a winery in the Yantai region of the Shandong province – still exists as the Changyu Pioneer Wine Company
  • Since 2000 Chinese wine production has focused on European red-style wines (from grapes) – China has become the world’s largest consumer of red wine
  • 2012, Chinese government unveiled a 12 year plan to support its own wine production
    • 12 wine regions
  • In 2001, China entered the World Trade Organization – tariffs on foreign wine fell from 65% to 14%
    • Immediately opened the doors for foreign wine producers
    • Red French wines, especially those from Bordeaux became extremely valuable

CHINESE WINE

  • Currently on of the top wine producers in the world
  • Younger generations in China are finally start to embrace Chinese wines after the domestic market lost a big share to imported wines
  • Great Wall & Changyu – generally made wine by blending partly fermented grape juice with flavorings
  • Have grown rapidly over the past decade planting around 120,000 hectares of vineyards
    • Propelled them into the top 10 of the world’s biggest wine producing countries
  • GRAPES: Cab, Merlot, Cabernet Gernischt, Marselan
    • Less planted but still around are Syrah, Pinot Noir, Saperavi, Malbec
    • Movement to find a signature grape to give the Chinese wine industry a point of difference
      • Hoped it would be that Cab Gernischt (descendant of Cab Franc)
      • Now focus is Marselan – originated on the French Mediterranean coast
        • Second most planted to Cab Sav
    • WHITE: Chardonnay, Petit Manseng, Riesling, Welshriesling, Viognier, Vidal
    • Chinese consumers prefer red wine (90% of sales) 
    • Created a price war for Chardonnay so many are replanting with Riesling or the Chinese grape Longyan
      • Name means Dragon Eye and the skin turns a light red color when ripe
  • REGIONS: 8 large scale regions 
    • Ningxia – best known Chinese wine region internationally
      • Produces grapes with concentrated flavors, high alcohol levels, and strong tannins
      • Receives support from local government in terms of land resources, infrastructure and marketing promotions
      • Chateau Changyu Moser XV, Silver Heights, Legacy Peak, Domaine des Aromes (biodynamic) and premium Jade Vineyard)
      • In 2013, introduced a classification system grading wineries into five quality tiers who reassessed every two years
    • Xinjiang – Cab & Chardonnay
      • Considered a paradise for Grape growing by the Chinese
      • Diverse soils and favorable climate
    • Shandong – warmer more humid climate but theres an advantage
      • In cooler areas, they have to bury their wines to protect them during the winter
      • Has attracted Domaines Barons de Rothschile (Lafite) – yes, the same famous winery in France

CHINESE CONSUMPTION OF FRENCH WINE

  • 2007 demand for French Bordeaux wines skyrocketed
  • In 2000, less than 400,000 bottles went to China, now China is Bordeaux’s number one importer at about 80 million bottles per year
  • Chinese pay attention to the 1855 Classification of the Medoc which gave status to 61 estates over all others – an easy way to tell which wine is “the best”
  • 1982, Thomas Yip creates Topsy Trading Company with the goal of supplying luxury hotels with fine wine
    • First purchase was Petrus (right bank Bordeaux)
    • Then they got a lot of 1982 Lafite Rothschild at a close out price
      • Lafite Rothschilde became the most expensive and sought after wine in the asian markets 
  • Jean Michel Cazes owner of Chateau Lynch Bages sold 20,000 cases of his wine to Cathay Pacific Airlines for their first class customers
  • In the 1990s and early 2000s big importing companies move into China
  • 2001 WTO lowers tariffs on wine
  • 2008 taxes on imported wine in Hong Kong fall from 40% to zero
    • Ironically the demand for wine following the tax decrease shot up the price
  • 2008 economic crisis affected much of the west, but not China
  • China has since become more vintage conscious and has also moved on to Burgundy wines
  • First growth wines remain the most popular and command the biggest prices, others are:
    • Beychevelle, for their dragon boat label
    • Grand Puy Lacoste, because of association with Lacoste
    • Lynch Bages and Valandraud continue to promote themselves heavily

CHINESE BUYING FRENCH CHATEAUX

  • A trend of Chinese Bordeaux drinkers buying chateaux and producing the same wine but marketing it to China
    • Case on NPR, bought Chateau Bel Air, kept all the same workers – old French owner used to export 20% of wine to China, now export 70% there
  • The Chinese own 140 Chateaux, Belgium owns 40 – out of 10,000
  • Some see it as a good thing – France has high inheritance taxes so a lot of winemakers can’t afford to pass their properties onto their children – the Chinese buy the vineyards and restore them
  • Others take offense to name changing – like “Chateau Imperial Rabbit” or “Chateau Tibetan Antelope”

FRENCH COMPANIES INVESTING IN CHINESE VINEYARDS

  • Remy Martin agreed to a partnership with the Chinese government in 1980
  • Pernod Ricard has also invested in Chinese vnieyards

FUTURE OF CHINESE WINE

  • Chinese wine consumers know more about wine than ever before
  • In 2019 China was the Wine & Spirit Education Trusts second-largest market
  • Good access to more tastings and have more disposable income
  • Already 10 wineries with second-generation owners in Ningixa and the Silver Heights winery has already started to groom it’s third generation owner
    • Most children are sent abroad to study wine in order to take over and improve the quality of the wineries

IS THE MARKET WORTH IT? EXPORT WISE…

  • Australia & China – China imposed a 50 percent tariff on bottled wine after tensions spiked between the two governments over the origins of Covid 19 and Aussie’s ban on Huawei’s 5G network
    • But then they announced a tariff of 218%
  • So many international wineries have tried to create businesses in China to capitalize on their potential of growth
  • Beijing’s government is not afraid to actively intervene in the economy and crack down on wine-loving, free-spending government officials and business leaders
  • Wines from France and the US have all been caught up in international disputes that have nothing to do with grapes
  • Should’ve been the second biggest wine market by 2020 but now sits at 6 because of this
  • US wines after a trade war over steel and aluminum have increased from 48.2 percent to 93 percent
  • Price structure – there can be three different prices: untaxed or smuggled wines, wines traded through cross-border e-commerce with half of the import tax imposed and wines imported with 48 percent taxes of