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Plink-plonk diplomacy

7 June 2013 By Peter Thal Larsen

Sorry, wine lovers: tariff threats won’t end China’s thirst for Bordeaux. Talk of restricting imports from Europe has raised hopes elsewhere that fine wines might become more affordable. But French chateaux have more to fear from China’s anti-corruption drive than from trade war.

China’s apparently unquenchable thirst for fine wine has reshaped the industry in recent years. The combination of growing wealth and the desire for ostentatious display have pushed prices of the best-known vintages into the stratosphere. Wine merchants now tell their European clients to forget about stocking cellars with top French labels.

China takes action against EU wine imports

Source: C.Chan 05/06/2013

China takes action against EU wine imports

So it’s not surprising that Western connoisseurs welcomed news of China’s investigation into wine imports from the European Union. Unfortunately for them, trade restrictions probably wouldn’t affect the best vintages. Most pricey wine doesn’t go directly to China, but to places like Hong Kong, where it avoids Chinese duties and taxes, which can be as high as 50 percent. Bottles are then stored as investments, or spirited over the border.

China imported 430 million litres of wine last year at an average price of around $6 per litre, according to customs data. Hong Kong, meanwhile, imported 50.6 million litres, but at an average price of more than $20 per litre. Hong Kong’s imports of Bordeaux were worth more than the mainland’s, even though China received four times as much volume.

If the Chinese can make peace with the EU over the latter’s solar panel tariffs, wine imports may not be restricted at all. But restrictions on wine will be most painful for low-end producers that benefit from Europe’s agricultural subsidies. Two-thirds of China’s imports last year came from the EU, the majority from France. Drinkers could easily switch to Australian or South American alternatives – or even try domestic brands.

But high-end wine producers can’t relax. China’s new leaders, keen to batter corruption, have restricted entertainment by party officials. Dealers say that’s already affecting demand. The mainland’s appetite could shrink further if quaffing fine wine is deemed an unacceptable display of wealth. Now that’s the kind of crackdown Western wine lovers could genuinely applaud.



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