China is now the world’s fastest growing wine market and domestic productions profits from the climate change
China has emerged on to the global wine scene with unprecedented speed in recent years, both in terms of production and consumption. After Spain, China boasts the second largest area under vine cultivation with 847,000 hectares, while France is third, and Italy is fourth. In terms of wine production, Italy was the world’s leading producer in 2018 with 42.5 mln hls, followed by France with 36.7 mln hls, and Spain with 32.1 mln hls. While China has the second largest land area under vine cultivation, it produces three to four times less than the European leaders at just 11.5 mln hls. This amount is on a par with Australia at 11.9 mln hls and South Africa with 11.2 mln hls.
The national wine consumption has more than doubled in the past two decades, and only 10% of this is satisfied by imported wines. The Chinese wine import has reportedly even decreased 7.8% during the first 2 months of 2017, compared to the same period of 2016. 22 out of the 28 EU member states has exported wine to China in 2017; as indicated in the following map.
De decrease is still continuing. China’s wine imports of 2018 show a decrease of more than 19% compared to the previous year. Insiders attribute this to the higher margins wine traders can get from selling domestic wine.
China’s indigenous vine species have been cultivated and used to make wine for more than 1500 years, but it was not until the end of the 19th century that wine production gained any form of scale and formality, with the help of European missionaries, in particular in Shandong province. The Changyu winery was established in Yantai (Shandong) soon after this in 1892, and retains a significant position in Chinese wine today.
At the turn of the new millennium there were an estimated 450,000 ha under vine in China, including classic varieties such as Cabernet Sauvignon, Cabernet Franc and Merlot that were introduced by foreign investors along with Western winemaking techniques. Today, many international wine companies have interests in China, including Moet Hennessy, Remy Cointreau, Pernod Ricard, Torres and the Bordeaux families of Lurton and Barons de Rothschild (of Cheval Blanc and Lafite Rothschild respectively).
China’s wine industry has experienced unprecedented growth in the past decade, and millions of dollars have been invested in establishing a wine tourism industry. However, this growth has not been without controversy: wine counterfeiting has been a major issue and the quality of Chinese wine is thus far patchy, ranging from excellent to undrinkable.
Thumbs up for climate change
In the early 1950s, China planted 3,200 hectares of grapes. By 2016 that area had expanded to 847,000 hectares. The growth, and the development of the wine industry in general, have been aided by technological advances. Climate change is another, often overlooked contributing factor. According to the latest analysis from the Chinese Meteorological Administration, average temperatures in China have risen 0.5-0.8C in the last century, making it possible to cultivate wine grapes 100-160 kilometres further north. The zones suitable for wine grape cultivation have been creeping into China’s north-west and north-east. Research by the North-West Agriculture and Forestry University (NWAFU) shows that climate warming has shrunk the areas with the short frost-free periods and low temperatures that restrict grape-growing.
Climate change doesn’t just mean China is producing more wine; it’s producing different wine too. Further research by NWAFU explains that weather is crucial to a grape’s quality as it matures – and so to the quality and mouthfeel of the wine from that grape. Higher temperatures mean faster maturation and accumulation of sugars, but less malic acid, all of which affects flavour. From 1951 to 2017, temperatures increased during the grape maturation season in most of China’s 92 wine-producing regions. That means more gluconic acid and therefore a stronger and thicker mouthfeel and higher alcohol content. The following map shows the changes in the Chinese wine regions due to climate change.
Major wine regions
In this blog, I will introduce China’s main wine regions.
Hebei province, the capital city of Beijing and port city of Tianjin are de facto one region. The province spans 6 degrees of latitude between 36°N and 42°N and is home to a wide range of landscapes, from the floodplains of the Yellow River in the south to the Yan Mountains in the north. A wine industry surrounding the Cabernet Sauvignon grape variety has sprung up in Hebei and there are also some smaller plantings of Chardonnay, Merlot and Marselan.
Despite the proximity of the Bohai Sea, the climate in Hebei is more continental than maritime. Hot, humid summers are followed by cold, dry winters that are subject to freezing winds from Siberia. Hebei is affected by the East Asian Monsoon, a weather system that brings cool, moist air from the Pacific and Indian oceans and causes rain when this collides with warmer air over the continent. Most rainfall occurs during the summer, and growers in certain parts of the province must be wary of the dangers of fungal vine diseases in the late summer and early fall.
Huailai sits in the shadow of the Great Wall of China in the hills surrounding Beijing and is home to several large Chinese producers. Among these is Greatwall, one of the country’s most famous wine producers. As in many parts of China, there is significant interest from French producers, and the Sino-French Demonstration Vineyard was planted in the late 1990s as a joint venture between the French and Chinese governments. Huailai’s terroir has proved well suited to viticulture, with the close proximity to Beijing’s large population providing an excellent added incentive for the development of a wine industry here. Vineyards at altitudes up to 1000 m above sea level have a much cooler climate than Beijing, and high levels of sunshine ensure that grapes receive ample sunshine for ripening.
Changli is situated on the coast just south of Qinhuangdao. Cabernet Sauvignon vines are planted in the agriculturally suitable land surrounding the city, and several large producers are located here. An interesting player based in Changli is Moutai. Patrons of this site will know Moutai as China’s top selling baijiu (spirit). Moutai has recently been cashing on its high brand awareness, including establishing a winery in Changli.
Tianjin is a municipality on the east coast of China, close to Beijing. Some viticulture takes place along the Jiyan River in the east of the region. A small amount of wine is made here from Cabernet Sauvignon, Muscat Hamburg and Chardonnay. Although the terroir in Tianjin is not ideal for grape-growing, the region’s main viticultural advantage is its proximity to Beijing. Dynasty Wines, one of China’s largest wine companies and a joint venture with the French company Remy Cointreau, is based in Tianjin and makes wines from grapes grown within the municipality as well as from those grown in more-famous regions such as Ningxia.
Unfortunately, Dynasty has been struggling with decreasing turnovers for the past few years. Dynasty’s management admits that it has problems with keeping up with changes in the environment. On one hand, other domestic wineries have dramatically improved their quality and some are winning international awards. On the other hand, imported wines have become more accessible due to China’s entry into the WTO. Dynasty needs to shake up its product range and upgrade its brand perception.
Ningxia is a rapidly emerging wine-producing region in the central-north of China. The wide, heavily irrigated valley between the Yellow River and the base of Helan Mountain has proved to be one of China’s most promising vineyard areas. A range of wines are made here from grape varieties such as Cabernet Sauvignon, Cabernet Gernischt and Chardonnay and they vary in quality from insipid to excellent.
While Ningxia covers 66,000 sq km, most viticulture takes place in a 160 km river valley in the very north of the region. Here, the Yellow River provides sufficient water for irrigation and the arid landscape has been transformed into arable land well suited to the production of wine.
Ningxia has a thoroughly continental climate, its eastern border lying some 950 km from the nearest ocean. The summers are hot, although the high altitude of the vineyards (some more than 1200 m above sea level) helps to create a suitable climate for wine-growing. At this altitude, intense sunlight during the day is followed by much cooler nights. This diurnal temperature shift – which is exacerbated by the lack of moisture in the air – helps to slow ripening in the grapes, leading to a balance of phenols and acidity.
The short growing season in Ningxia is followed by a long, cold winter, and vines must be protected from freezing temperatures with an insulating mound of dirt piled around the base of the plant. While this is an expensive and time-consuming task, the abundance of labour in China means that it is much easier than in other parts of the world, adding a human element into the overall terroir of Ningxia.
The land at the base of Helan Mountain is part of the Yellow River floodplain, and the soils have been deposited over time by both the river and from material washed down from the mountains. These pebbly, sandy soils are free draining and have low fertility, which lessens both vigour and yield in the vine, leading to smaller, more-concentrated berries.
Helan Mountain, is particularly well regarded and in 2003 became China’s first official appellation, recognized by the Chinese General Administration of Quality Supervision, Inspection and Quarantine. A 2009 Helan Qing Xue Jia Bei Lan Cabernet blend made in Helan Mountain won a major trophy at the Decanter World Wine Awards in 2010. The terroir of Ningxia has not escaped international attention, and companies such as Pernod Ricard and Moet Hennessy have interests in the region, along with some of China’s largest producers. Some commentators have been quick to point out that the slower-ripening Cabernet Sauvignon grape variety is perhaps not suited to the shorter growing season here. But Chardonnay and Riesling perform well, and some vignerons have expressed interest in experimenting with Syrah and the production of sparkling wine.
Other top wineries in the Ningxia region are:
Silver Heights; This family owned winery helped put Ningxia on the wine map. Its entry-level Last Warrior Cabernet-Merlot is sold in the UK and Canada. Several strides higher is The Summit, a Cabernet-Merlot that starts quiet and moody, then steadily gains power and complexity, with potent ripe fruit, dark chocolate, smoke and vanilla elegantly packaged.
Kanaan; In a nation fixated on reds, Kanaan puts out a pair of decent whites, including a semi-sweet blend and a Riesling. The latter is inspired by the decade owner Wang Fang spent in Germany and the 2017 Riesling is for sale in the UK.
The government of Helanshan is actively supporting the local wine industry. One activity in this respect is representing the wine industry of the entire region on major trade fairs.
Known for its unique nomadic culture and autonomous political status, Inner Mongolia is also recognised as China’s northernmost wine region, producing approximately 41,413 hls in 2011. Making up of a mere 0.4% of China’s 2011 total production volume, this boutique area boasts one of the most sophisticated organic viticulture models in China. Planting their first vines in the early 1980s, Chateau Hansen established their current 250 hectares of vines incorporating organic principles. The owner of Chateau Hansen is Mr. Han Jianping, originally a real estate tycoon before he bought Chateau Hansen and serves as Chief Executive of the chateau. Certified by the Chinese government and on its way to obtaining the European “Bio” label, Chateau Hansen is forging its own path to produce organic wines in one of the most challenging climates in the world. Wuhai, Hansen’s home region, is located in the southwest of Inner Mongolia. It has a semi-arid continental climate, with hot summers and cold winters, featuring huge diurnal ranges, and a relatively long frost-free period. Now the total vineyard area of Wuhai is around 1333.3 ha, with main varieties: Cabernet Sauvignon, Cabernet Gernischt, Rkatsiteli, Zinfandel and Riesling.
Shandong is one of China’s oldest wine-producing regions. Cabernet Gernischt, Riesling and Chardonnay are the most important grape varieties grown in the province. The most viticulturally important part of the province is the 274 km Shandong Peninsula (also known as the Jiaodong Peninsula) that juts into the Yellow Sea toward Korea. The Yantai International Wine Exposition is an important annual event on the Chinese wine calendar and attracts interest and exhibitors from around the world.
The terroir of Shandong avoids the harsh continental extremes of the centre of China and instead has a maritime climate, with cooler summers and warmer winters. Shandong is affected by the East Asian Monsoon, a weather system that brings cool, moist air from the Pacific Ocean to the shores of the province, causing summer rain. Fungal vine diseases caused by high rainfall are an important consideration for vignerons in the late summer and early autumn. Most of Shandong is relatively flat, coastal terrain, although the middle of the province is marked by some hillier country; the highest peak reaches 1500 m above sea level. Many of the vineyards spread throughout the province sit on south-facing slopes where better drainage helps to lessen the impact of summer rain, ensuring the vines do not get ‘wet feet’ and become waterlogged.
The most famous foreign investor in this region is Lafite. Domaines Barons de Rothschild (Lafite) teamed with local partner CITIC to start a winery in Shandong on the east coast (CITIC left the partnership in 2018). The project progressed until it now has 360 terraces totaling 30 hectares of vines – 25 in full production – on the granite-based soils of Qiu Shan Valley. Lafite has released the name of its decade-old Chinese project: Long Dai. The first wines are slated to go on sale September 2019 and be delivered in late November, with Pernod Ricard as exclusive distributor. Exports are to follow in 2020.
Another notable project in Shandong is Changyu Moser. It combines China’s oldest producer, Changyu, with Austrian winemaking family Moser. The wines are listed by dozens of vendors abroad. The entry-level Cabernet Sauvignon is found around Europe, including Germany, Portugal, Switzerland and the UK. A few steps up is Moser Family Cabernet Sauvignon. A first for China is their white Cabernet.
Shanxi covers a mountainous loess plateau between the western desert and the coastal plain, Shanxi is becoming increasingly well-known for its wines. These are made predominantly from Cabernet Sauvignon, Muscat, Chardonnay and Merlot. The province of Hebei is on the eastern border, and the Yellow River makes up the western edge of the province. China’s capital city, Beijing, is about 400 km from the Shanxi capital of Taiyuan, where much of the province’s viticulture takes place. Grace Vineyards is Shanxi’s best-known grower, and is one of China’s most highly regarded producers in terms of quality. Its Shanxi vineyards are located on the deep sandy loam soils outside of Taiyuan, where excellent drainage allows the vines to grow deep root systems, encouraging the health of the vine.
Shanxi has a continental climate, but is still affected by the East Asian Monsoon, which brings cool, moist air from the Pacific and Indian Oceans to the warmer land, causing rain. Most of the annual rainfall occurs in summer, and high levels of humidity can promote fungal vine diseases such as mildew. However, this rain is inconsistent from vintage to vintage, and Shanxi’s high altitude and high levels of sunshine mean that in years when there is less rain, high diurnal temperature variation results in grapes with a balance of phenolic ripeness and acidity, leading to good quality wines. Winters in Shanxi are cold and dry, due to far-reaching weather systems from Siberia. As temperatures drop below freezing, growers must bury the vines to insulate them from the devastating cold over the winter. While this is an expensive and time-consuming process, an abundance of labour means that it is possible in this part of China.
Xinjiang is mostly associated with light, uncomplicated wines made from Cabernet Sauvignon, Chardonnay and Merlot. Xinjiang covers 1.6 million sq km. Much of this area is either desert or mountain, and Xinjiang is cut neatly in two by the Tianshan mountain range. It is along the southern edge of these mountains that most viticulture takes place, particularly surrounding the cities of Turpan and Bayingol. Changji near the capital Ürümqi is also producing high quality wines, like Niya and Xiyu Shacheng.
Xinjiang’s climate is truly continental: the region contains the point on land that is furthest from any ocean. It is officially classed as a semi-arid desert climate on the Koppen climate scale, and is characterized by hot summers and very cold winters. Ample sunshine during the growing season ensures the grapes can reach full ripeness, and the low annual rainfall means that there is little pressure from fungal vine diseases. The vines are subject to winter freezes, and as such are buried during the winter for insulation. On the northern side of the mountains, where the climate is cooler and slightly more precipitous, several growers are enjoying considerable success with the production of ice wine, mostly made from the hybrid Vidal grape variety.
Wine has been made in this part of China for around 3000 years. Greek settlers brought vines and farming methods around 300 BC, and 13th Century explorer Marco Polo described Xinjiang grape wines in his writings. Although Xinjiang is currently better known for bulk wine production, the viticultural sector here is seeking to improve its winemaking techniques and select better cultivars in order to markedly increase both the quantity and quality of the wines. As a result, the region is beginning to attract attention from international investors, winemakers and consumers. Loulan wine has won an award at a Hong Kong wine tasting event.
Yunnan is a province in the south of China. The tropical, mountainous terrain in this part of the country is supporting an increasing amount of viticulture, mostly based around the mysterious hybrid varieties Rose Honey, French Wild and Crystal.
A chain of mountains runs through the western part of Yunnan’s 394,000 sq km, giving rise to a landscape that is not well suited to commercial, large-scale agriculture. However, the warm climate is moderated by the Indian and Pacific Oceans, and the growing season here is correspondingly long and favourable. A selection of crops, including rice, tea, coffee, wheat and tobacco, is produced on the few areas of arable land available in Yunnan. Viticulture has become an important part of the agricultural economy here, particularly in the past few decades. Yunnan lies between latitudes 21°N to 29°N, which is similar to the Sahara Desert in Africa. The temperatures usually associated with low latitudes are moderated by the high altitudes here, and vineyards at elevations as high as 1800 m above sea level are saved from the ill-effects of the heat by significantly cooler nights. The diurnal temperature variation during the growing season helps to extend the ripening period, allowing grapes to develop flavour along with acidity. Mineral resources are abundant in Yunnan, and as a result, soils throughout the province are rich in minerals.
A Yunnan wine known abroad is Aoyun. The grapes, sourced from 300 tiny plots scattered between 2200 and 2600 metres, have reportedly made exciting wines from year one. Critics like Robert Parker, Wilfrid Wong and James Suckling have praised Ao Yun. A collective tasting note might cite a complex wine with intense red and black fruit, hints of licorice, chocolate, graphite and forest floor, and fine tannins.
Since the 1980s, Yunnan producers have focused more carefully on wine quality, and as in many other parts of China, international producers are starting to take notice. Moet Hennessy has opened a winery in Deqin County in the north of Yunnan (the supposed location of ‘Shangri-la’), and Bordeaux winemaker Pierre Lurton (of Cheval Blanc and Chateau d’Yquem) has also expressed interest in the province. More than 150 years ago, Jesuit missionaries from France introduced a honey rose strain of Cabernet grapes to the Deqin area, where they have been cultivated on a small scale ever since.
Chinese buyers own 2% of Bordeaux chateaus and 10% of Barossa Valley
Chinese are also heavily investing in foreign wineries, in particular in the Bordeaux region. More than 150 or 2% of vineyard chateaus in Bordeaux are now owned by Chinese, China Business News reported citing industry estimates. Seeking beyond import business, the chateau investors aim to lock fine wine from production phase for their booming home market. Bordeaux has seen explosive surge of Chinese investors over the past decade, while it took Belgian buyers about 70 years in comparison to acquire over 100 chateaus in the region, Li Lijuan, director of Christie’s international real estate market in China, told the newspaper. Chinese buyers spend on average EUR 5 to 10 mln on a chateau whose vineyard could take up 10 to 30 hectares, according to an industry works Le Vin, le Rouge, la Chine. Recent corporate investors include subsidiaries of local wine company Changyu and food conglomerate Bright Food Group and COFCO. Investment return could be as high as 10 percent for those who have marketing and sales channels in China, Li said, adding that Chinese buyers also see chateaus as a resort for family or good real estate investment given long return period. “About 20 years ago, Chinese economy was boosted by foreign capital including those from France, while nowadays Bordeax could use help from China to retain its world-class standard,” Somalina Nguon-Guignet, managing director of French property specialist IFL, was quoted in the book as saying. “France ought to feel pleased by interests it receives from foreign investors.”
Experts revealed that by October 2018, up to 10% of the wineries in Australian Barossa Valley are now owned by Chinese nationals. Chinese businessman Arthur Wang owns two wineries and a vineyard in the Barossa Valley; Chateau Yaldara acquired in 2014 for A$15.5 million and 1847 Wines acquired in 2010 for an undisclosed sum. Since Wang’s takeover of 1847 Wines, the company’s exports have quadrupled with 90% of its products available in China.
Shangdong-based wine maker Weilong has started harvesting the first wine of its Australian subsidiary, located in Victoria. It plans to have the wine bottled by the end of 2019, and on sale for Chinese New Year in January 2020.
A big issue is pairing wines with Chinese cuisine. Chinese do not eat beef today, fish tomorrow and pasta the next day, like most Westerners. A Chinese lunch or dinner will contain at least one meat or fish dish, but often two and one ore two vegetable dishes, which can actually also contain some meat to flavour the dish. Chinese wine experts are doing their best to come up with pairing rules and the first wine pairing contest, concentrating on Yunnan cuisine, was held in Fangshan (Beijing) September, 2018.
Eurasia Consult Consulting can help you embed your business in Chinese society.
Peter Peverelli is active in and with China since 1975.