Geography and Demography
Capital : Beijing
Location : East Asia, neighbouring the Eastern China Sea, the Golf of Korea, Yellow Sea and the Southern China Sea, between North Korea and Vietnam.
Climate : Extremely diversified from tropical in the south of the country to subarctic in the north. The major part of the Chinese territory is situated in the northern moderate zone with a tepid climate and well distinct seasons. In China the continental climate is determined by the Monsoon.
Total Population : 1300 million inhabitans
Working Population : 750 million people, i.e. 58,7% of the population in 2002
Ethnicities : China consists of 56 different ethnic groups. The Han are the largest group (i.e. 91,6% of the population), plus 55 ethnic minorities.
Among those are 18 ethnic groups with a population of more than 1 million inhabitants.

Government : Communist State Administrative divisions : 23 provinces, 5 autonomous regions, 4 municipalities President : Hu Jintao Elections : President and Vice President are elected by the Congress of the National People for a 5 year mandate.

Gross Domestic Product : 11 669 billion CNY in 2003 GDP- per inhabitant : 1090 dollar Currency : Yuan Division of Economy : Agriculture 15%, Industry 53%, Services 32%. Growth Rate in 2003 : 9,1% Inflation : 1% in 2003 Foreign trade 2003 : 85 billion dollar, that is a rise of 37% compared to the previous year Exports 2003 : 438 billion dollars (+35) Imports 2003 : 413 billion dollars (+40%) Export Products : Machines and equipment ; textiles and clothes ; shoes ; games and sports articles ; mineral fuels. Main Importers : United States, Hongkong, Japan, South Korea, Germany, Netherlands, United Kingdom, Singapore and Taiwan Main Exporters : Japan, Taiwan, South Korea, United States, Germany, Malaysia, Hongkong, Singapore, Russia, Thailand

The history of vitiviniculture in China goes back to 206 B.C. At the time of the Han dynasty, wine was even produced on a large scale for the imperial palace. However, the brevity of the growing season for grapes, compared to the almost all year long availability of cereals, has limited the expansion of vitiviniculture, resulting in its disappearance into the heart of China during the decline of the dynasty around 220 A.C. Some 400 years later at the beginning of the Tang dynasty (618-907 A.C.), wine produced from grapes, has become popular again in the Chinese capital, claiming again its title of nobility during the Yuan dynasty (1271 – 1368). After this epoch, wine has been moved into the shadow again and did not reappear until the the end of the Qing dynasty (1644-1912), with the import of European wine. In 1892, a Chinese from overseas, has planted a vineyard and built a wine making cellar under the name Zhang Yu Wine Company at Yantai in the province of Shandong. I has been the first modern cellar serving Chinese interests. After the accession of the People’s Republic of China, the vitivinicultural sector has introduced a range of Eastern European wines during the 1950ies and at the beginning of the 60ies. The production on a large scale has only started during the last ten to twenty years . At the beginning of the 80ies foreign companies, notably French ones, have invested into the Chinese viticultural sector. Since then the majority of those companies have retired from the market. Since 1996 the Chinese government encourages much stronger the consumption of wine instead of other alcoholized drinks. For this purpose it has proposed measures in favour of the production of local wine and the bottling of imported wine. According to Vertumne International & Associates, the grape harvest in 2001 in China corresponded to 250 000 tons of grapes. Even if this has been used primarily to produce wine, it is difficult to estimate the wine production in China. In this country wine is defined as a drink, whose composition is based on at least 50% grape juice. Still according to Vertumne International & Associate, 4 million hl of wine were produced in China in 2004, compared to 3,8 million hl in 2001. Up till now the local production was above all manufactured from raw grapes mixed with wine imported in bulk. However, as the Chinese extend their vineyards and improve their oenological processes, the import of wine in bulk for mixing has fallen considerably.

It is difficult to evaluate the consumption of wine in China because it is not clearly defined what constitutes wine. Likewise products that are not declared and imported from Hongkong and elsewhere, are sold on the black market, rendering the task still more difficult. However, Vertume International & Associates estimate that this market corresponds to approximately 6 million hl. The wine consumption in China raises continously since end of the 90ies. According to Chinese customs the wine consumption in China has increased from 0.19% in 1997 up to 0.29% in 2002, representing an increase of 53%. The wine consumption is equally influenced by holidays, a period during which the consumers drink more wine. Generally, the wine consumers are people with a higher purchasing power and who have persued higher education. Moreover, there are more men who drink wine than women, while 60.5% of the consumers are aged between 25 and 44 years. At the beginning, when foreign wines were offered on the Chinese market, they profited from a noble image due to their aspect of inaccessibility. Since then they have become much less a symbol of social status and the Chinese consumer is more considerate of what he buys. Currently foreign wines are affected by two major obstacles – lack of legibility and high selling prices. Although imported wines hold a dominant position in the category of quality wines, especially in CHR, foreign wines are no longer popular in China. On the other hand the Chinese are very familiar with the domestic labels.

The sales of wine in China have changed in a dramatic way since a few years, in particular since the arrival of supermarket chains and the development of wholesalers. Around 65% of the wine sold in China is distributed on a large scale, while less than one percent is sold by specialized shops. Even if it is possible to find foreign wines in supermarkets and specialized shops in the great cities, the majority of imported wines is sold in CHR and in thenight clubs.

According to the Canadian Embassy in Beijing, wine is distributed in China through the following two networks : · The National Chinese Society For Import and Export of Cereals, Oilseeds and Food, a state company which holds a monopole as wholesaler and distributor of alcoholized drinks · Joint ventures and hotels serving foreign interests as well as shops that are not part of the Service de Voyage Chinois (SVC). This network, however, has got its limitations, because the products which circulate there cannot be sold via the network of general distribution In addition to both import networks mentioned above, there is apparently a parallel sector at Hong Kong and at Guangzhou, which permits importers to avoid the regulations and the imposed taxes. However, the remarkable fall of taxes and regulations and the intention of the government to apply more rigorously customs regulation have diminished the amount of products that are sold by smuggling. The interior distribution networks of imported wine are still very little developped. The majority of the importers or owners of labels have to participate directly in sales operations by setting up a team which collaborates with the local distributor. For a complex product like wine, it is difficult to convince a distributor to invest his own resources to improve the knowledge of its representatives. Consequently, some of the main importers and distributors of wine deal now with all aspects of sales and marketing in the interior of the country, such as the storage under controlled atmosphere, broadening the knowledge of the sales representatives on the product, sales promotion, sales and delivery.

The distribution of shops that are excluded from taxes in China is controlled by a monopole, the China Duty Free Group (CDFG), a state company based in Peking, reporting to the Mission Economoque de la Grande Chine. It controlls more than 150 points of sale on Chinese territory, of which 24 are established in the province of Guangdong, 3 at Shanghai and 3 at Peking (except airports). The duty free purchases can be carried out, either at arrival on Chinese territory or at departure, this second possibility currently constitutes the main part of the sales. The distribution of wine and spirits sales has established itself as follows : more than 70% of brandy (of which cognac takes the first place in the sales of spirits), 20% of whisky, the remaining 10% include primarily other alcohols, such as alcohol made of Chinese cereals, imported alcohols and wine, this one remains very marginal in terms of sales with 5% of the total of the wine and spirits branch. French wines made a weak progress for several years. French wines represent 70% of the wine sales in the CDFG shops. Geographical proximity, sensibility particularly for internationally renown labels and the notion of memory gifts, strong in Asia, explains that the clients are mainly constituted of businessmen and Asian tourists from other regions. The crisis of SARS in spring 2003 has very much affected the sales of duty free products, bound closely to the tourism sector. The CDFG could consider to reinforce its range by including more imported wines, including top-of-the-range French wines, but at the moment, the group is conscious of the immaturity of the wine market in China, and prefers to stay careful. The CDFG envisages an increase of wine and spirit sales of 30% within 5 years.

The Chinese market is primarily composed of local wines, produced in the West of the country and imported wines. However, only three labels are distributed in the entire country – Changyu, Dynasty, Great Wall. Those alone represent more than 50% of the Chinese market. The domestic wines correspond with 85% of the consumption. The Chinese prefer red wine to white wine ( 80% - 20%). The preferred wine varies from region to region. According to Channel Consulting Ltd., dry red wine is the most appreciated category by Chinese consumers (68%), followed by sweet red wine (23%), dry white wine (8%) and others (1%). (Source : Vertumne International & Associates)

In China the majority of wine is sold for more than RMB (4.8 US$) a bottle, while the average Chinese generally buys wine under CNY 30 (3.6 US$). Consumers estimate that very often the local wines that are sold between 40 – 55 are of a better quality than imported wine that is marketed at CNY 75 – 95. However, imported wines have to become more competitive, because at 1January 2004 the Chinese government has reduced the tax by 14% on imported bottles. This figure has regularly dropped since 2001, when it was 44.6%. (Source : Vertumne International & Associates)

The following prices of wine at retailers in Beijing are representative of the current market prices (Mai 2003) . The approximate exchange rate of the Yuan (CNY), the official Chinese currency, is 9.93 CNY for 1 Euro. Prices of Wine Bottles of 750 ml Price (CNY) Red Wines (Chinese) Cabernet-Sauvignon by Dragon Seal 55 Dry Red by Dragon Seal 33 Gamay by Dragon Seal 56 Extra Dry Red by Dynasty 34 Dry Red by Great Wall 30 Red Wines (imported) Château Saint Pierre, Dry Red (EU) 45 Jacobs Creek, Red (Australia) 109 Calvet, Red (France) 118 Cabernet – Sauvignon by Gaston (France) 88 Valpolicella by Zonin (Italy) 72 Sauvignon BIN 555 (Australie) 156 White Wines (Chinese) Extra Dry by Dynasty 28 Dry by Great Wall 22 Dry by Dragon Seal 29 Chardonnay by Dragon Seal 46 White Wines (imported) BIN 222 by Domaine Wyndham (Australia) 156 Sauve by Zonin (Italy) 68 Chardonnay by Gaston 95 Chardonnay Jacob’s Creek (Australia) 109 Château Saint -Pierre (EU) 42 Château by Maine (France) 137 Bois by Graves (France) 119 Source : Canadian Embassy to Beijing

Figures in Value Wine imports of China in 2002 ( in millions of US$) Country - Spain France Italy Chile USA Imports Total Value - 1.4 5 1.6 9.3 1.4 23.3 Wine in Bulk Wine in bulk dominates the imports of Chinese wine, with Chile as first supplier in 2001, followed by the dropl of Spanish exports. The majority of the wine in bulk is mixed with Chinese labels, and thus not sold as imported wine. Still Wine in Bottles France is the leader in this category with more than 40% of the market. However, the image of French wine was affected by a scandal. In 1999, the Chinese have learned that cow blood is used to colour certain French wines. One part of the population started associating French wines and foreign wines in general with the mad cow desease. Then a rumour occured that certain labels from Bordeaux are counterfeits, thus harming the image of foreign wines in general. The market for sparkling wines remains limited, compared to the one of still wines and the one of wine in bulk. 99% of the sparkling wines consumed in China are produced locally. Those are in general cheap products, available in 1.5 l bottles.

With its tropical climate, the South of China is not a wine producing area. The consumption is primarily constituted by wine that is produced or gathered in the provinces outside Guangdong. 92% of imports are composed by still wines in bottles. The low quantity of imported bulk (1500 hl in the first ten month in 2002) are used to supply the small local bottlers who have restricted capacities compared to the cellars of their colleages in the North of China.

China is a relatively young market and difficult to evaluate. Many observers agree that there is still a wine stock surplus in this country. However, according to the Wine Institute, even if only 8.3% of the Chinese population could buy wine, this figure would correspond to 100 million people. Likewise more and more women have started to drink wine and the Chinese are attracted to the idea that wine is good for your health.