Ningxia strives to be France’s Bordeaux amid tariffs on Australia
A worker pours wine in a cellar in Yinchuan, Ningxia Hui Autonomous Region in 2015.
GOH CHAI HIN | AFP | Getty Images
BEIJING – After a sharp increase in wine exports and a visit from President Xi Jinping last year, China wants to make its main wine region, Ningxia, a region that rivals Bordeaux in France.
By 2035, the Helan Mountains region of Ningxia aims to produce 600 million bottles worth 20 billion yuan ($ 3.12 billion), according to a plan approved by the central government in late May. The area along the Yellow River is about a two-hour flight west of Beijing and lies at a similar latitude to that of the famous wine region of France.
“If this goal can be achieved, the eastern foothills of the Helan Mountains will become an important and internationally influential production area, with a scale corresponding to that of Bordeaux,” Sui Pengfei, director of international cooperation at Bordeaux, told reporters. Chinese Ministry of Agriculture last week in Mandarin. according to a CNBC translation.
Ningxia is just one of many wine regions in China, but the eastern foothills of its Helan Mountains have a grape variety comparable to that of Bordeaux or the Napa Valley in the United States, and accounts for the majority of the national wine production, Sui mentioned.
Even though the 15-year target is more than four times Ningxia’s annual wine production, the numbers roughly match those for the French wine capital.
Bordeaux produced 522 million bottles worth 3.5 billion euros ($ 4.16 billion) last year, according to a French industrial group.
Like many high-level Chinese plans, the wine plan is vague on the details of implementation. Instead, it establishes a framework for development that ranges from improving local wine knowledge and ecological conservation to “a window” for Chinese wine “to fit into the world,” according to a CNBC translation of the text. Chinese.
Last year, during the coronavirus pandemic, Ningxia’s wine exports increased 46.4% to 2.65 million yuan (about $ 414,100), according to the local customs agency. Major destinations included the United States, the European Union, Australia and Japan.
Ningxia-based winery Xige Estate exported wine to Canada last year, founder Zhang Yanzhi told CNBC.
His company started exporting to Switzerland, Japan, Hong Kong and France in small quantities this year, he said, adding that there are plans to enter the US market as well.
However, he said he plans to focus on the Chinese market, with exports only accounting for 10-20% of production in the long run.
China ranks sixth for global wine consumption and tenth for liter production, according to an annual report released in April by the International Organization of Vine and Wine.
The report notes that China’s wine consumption and production has declined in recent years, potentially due to harsh weather conditions and low productivity. These problems “make the Chinese wine industry less competitive with imported wines,” the authors write.
Australian wine imports plunge
Pressure from the central government this year to further develop Ningxia vineyards comes as China’s relationship with Australia deteriorates.
The country was the largest source of foreign-made wine in 2020, slightly above France, but Chinese tariffs imposed in March essentially blocked new imports of wine from Australia.
While Australian producers have found new buyers in the UK, US and South East Asia, it will likely take three or four years to recoup losses – and all of the 1,000 or so wine exporters focused on China will not survive, said Tony Battaglene, managing director of Australian Grape and Wine, an industry interest group.
He said Australian companies still hope to re-enter the Chinese market when tariffs are expected to expire in five years, and Australian wine experts can help Chinese producers overcome climate-related issues the two are facing.
Chinese wine rivals at home
In the Chinese domestic market, local producers still face competition from high-quality wines at low prices, Battaglene said.
Internationally, Chinese producers have “a long way to go before they become a big exporter,” he added.
At last week’s press conference, officials made no comment on Australia’s wine tariffs.
As a result of these tariffs, Chinese wine imports from Chile and France are increasing, said Zhang de Xige, who also attended the event in Beijing. He said the government’s focus on the Ningxia wine industry will likely help wineries get financing, as they won’t be seen as just farming businesses.
Zhang added that the growing attention to the wine industry is helping boost domestic tourism. Its 22 rooms, which cost 1,200 yuan ($ 188) a night, have all been sold every weekend since early May.
In addition to the popularity of foreign brands, one of the biggest challenges for the Chinese wine industry is the local preference for a strong, clear liquor known as baijiu. Alcohol is a staple at Chinese business and government dinners, and one of the main brands, Kweichow Moutai, is one of the largest publicly traded stocks in mainland China.
If the wine can be as cheap as baijiu, around 40 yuan ($ 6.20) for some bottles, then more people will consume it, said Sui of the Agriculture Ministry. The Chinese must “drink less baijiu, drink more wine”.