China View: The Once Surging Wine Industry Stagnates as Demand for Domestic Wine Slows
PK24
China is one of the largest producers of grapes in the world, contributing to more than half of the world’s grape production. A majority of the grapes are used for juice, raisins, and wine. In 2016, the country was the world’s 6th largest wine producer. In 2021, the country ranked sixth in global wine consumption and tenth in production by liters. The domestic wine industry has grown significantly in recent years, with regions such as Ningxia, Shandong, and Xinjiang emerging as important wine-producing areas.
There is a growing awareness of the health benefits associated with moderate wine consumption. This has led to an increase in demand for wines that are marketed as natural or organic. People are also increasingly purchasing wine to showcase it as a luxury item, which has led to a growing demand for high-quality wines. This increase in demand and popularity has also resulted in wine tourism, which offers activities such as wine and food tasting, grape picking, and learning about wine culture. Platforms such as Taobao, Tmall, Pinshanghongjiu, and Jiubaowang are increasingly utilized to purchase wine and other alcoholic beverages online.
However, wine consumption in the country has been steadily declining in recent years. In 2023, the country saw a significant decline in wine consumption, with a 24.7% decrease compared to 2022. In recent years, China’s wine market has faced significant challenges marked by declines in consumption, imports, and domestic production. There are concerns that problems such as climate change, low production, and poor regulations and standards are hindering the development of the domestic wine industry. There are also fears that these issues “are making the Chinese wine industry less competitive compared to imported wines”. How does the industry aim to improve demand for domestically produced wine?
Wine consumption in China from 2013 to 2023 (in million hectoliters)
Since the founding of the People's Republic of China (PRC), grape and wine production has continued to increase. In 1949, there were only 6 wineries. The domestic wine industry has developed significantly since the Reform and Opening Up policy in 1978. Due to rapid economic growth, improved living standards, and a growing middle class, there was a rising trend in wine production and consumption in the country. During the 1980s and 1990s, “half-juice wine” was the main wine product in the market. This product was typically a mixed grape juice with water, sugar and other fruit juice.
These mixtures often include substances used to clarify the wine such as grape juice concentrate, which can lead to contamination or spoilage. In 1994, the Standard Half-juice Wine GB/T 1980-1994 was released and prohibited the production of wines containing less than 50% of natural grape juice, which helped improve the quality and taste of local wines. Since 2001 when China became a member of the World Trade Organization (WTO), wine production surged as competition from imported wines increased. The domestic wine production increased from 0.78 million hectoliters with a total vineyard area of 31,600 ha in 2001 to 11.50 million hectoliters and an area of 830,000 ha in 2015.
In recent years, the wine industry has achieved great developments with the support of national and local governments. The 12th Five-Year Plan (2011-2015) released in 2012 by the Ministry of Industry and Information Technology of China aimed to provide government guidance, support, and improve the regulation of the domestic wine industry. China Alcoholic Drinks Association (CADA) has also played a significant role in the development of the industry.
It serves as the “communication bridge between the government and the industry”. Regarding wine specifically, the agency conducts investigations and is involved in drafting development plans which outline the direction of the industry. As a result of government backing and expansion, wine production more than doubled from 495 million liters in 2006 to 1.2 billion liters in 2014.
The government is also heavily involved on the local level in regions containing vineyards. In Ningxia Hui Autonomous Region, for example, the central government approved a 15-year wine development plan to improve wine production to match the output of Bordeaux in France, which is one of the largest fine-wine producing regions in the world. Local governments have also begun investing in wine tourism to support local wine industries and promote economic growth.
The Ningxia Government issued a plan to develop the Helan Mountain Grape Culture Corridor in 2011 to boost tourism by establishing wine-themed towns with services and tourist facilities. This direct government support has proven vital for the local wine producer, exemplified by Ningxia wine exports surging by 46.4% in the early 2020s, which amounted to 2.65 million yuan (approximately $414,100).
Despite the significant development of the domestic wine industry, many challenges remain. Problems such as low yield, poor quality, and inconsistent standards, are hindering the development of Chinese vineries. While wine consumption remains high, local production has struggled to keep up with demand. There is also increased competition and demand for foreign wines from countries such as France, Spain, the United States, and Australia. From 2013 to 2017, total wine consumption in the Chinese market increased by 8.4%, while consumption of imported wine in the market increased by 98%, “thus Chinese wine imports have almost doubled over that 5 year period”.
Wine production volume in China from 2013 to 2023 (in 1,000 hectoliters)
While opportunities such as e-commerce and wine tourism can benefit the industry, challenges such as market volatility and climate change impair its growth. The sensitivity of wine production to climate-related factors significantly affects crop yields and quality, which ultimately impact prices and revenue. In regions such as Ningxia, labor costs, seasonal worker shortages, production cost control, and increased imports are also major challenges. Improved regulations and legislations are also necessary to solve some of these problems including grape cultivation and wine making production standards.
