This will be a relief for the wai guo ren (foreign) residents and visitors who have weathered countless gan bei (bottoms up) of rice wine at banquets over the three decades since China kicked off its contemporary global engagement. Wines first began to appear at banquets in the mid-1980s, including Great Wall and Dynasty – the early versions of which were not such a delight but were a welcome relief from the formidable Moutai. These days, a toast is just as likely to be a vastly improved local wine or an imported one.

China's love affair with wine and the burgeoning domestic industry it has kick-started, now make China the fastest growing market for wine in the world. This is not an idle observation - it is the official ranking by the world's wine agency, the Organisation de la Vigne et de Vin (OIV). Not because of a particularly high consumption rate, mind you – which in fact averages only a few glasses of wine per person per year; compared with Australia at three dozen bottles per person per year or France at double that. Rather, it is because China has such a huge population that even a few glasses per person per year already comfortably exceeds what we drink in total in Australia each year.

The consumption growth rate has been blistering. It has averaged roughly 15 percent per annum for the past five years, meaning that on a compounding basis, wine consumption has doubled in this short time. By the OIV’s measure, China is already consuming more wine than Australia and is ranked sixth by the OIV in the Top 10 wine consuming countries.

But while these figures have sparked a huge amount of excitement about the market in wine circles internationally, they need to be balanced with some perspective.

To many people's surprise, China already has a huge domestic wine industry of its own and is currently ranked as the seventh largest wine producing country in the world by the OIV. China is still well behind France and Italy, but is well in front of legendary wine countries such as Spain and Portugal, and the emerging New World exporters including South Africa, Chile and Argentina, and just a fraction behind Australia.The domestic industry is growing at breakneck speed too. There are now more than 500 commercial producers of wine, in 26 provinces – virtually half of them appearing in the last ten years.

The established top four producers (Great Wall, Dynasty, Changyu and Dragon Seal) already vie on scale with the top end of the Australian industry spectrum and several of the newer producers are getting there quickly too.

The stratospheric emergence of new industry leaders, like ViniSuntime, in effectively virgin territory for wine, in north-western Xinjiang Autonomous Region, makes the point perfectly. It had its first vintage in 1998, when it processed 300 tonnes of grapes, principally from established vineyards producing grapes for eating and drying. Just a decade later, it has a dedicated 10,000 hectares of vines growing grapes for its wineries – more vineyard area than in the whole of Canada.

Reliable figures in China are not so easily obtained and just exactly how much wine is actually consumed in the country, and the proportion of this which is (genuinely) local product versus an exact amount of what is imported, is not particularly clear. Wine is a heavily taxed item and this smudges the genuine scale of both imports and domestic sales. Collectively, however, domestic producers account for well over 90 percent of total national consumption and would probably account for even more if not for the climatic and cultural constraints to the industry's growth. Climate is a challenge in all regions: humidity and lack of sunshine in the coastal regions (around the Bohai Gulf), where the industry is still based, and extreme cold in the north and west (Ningxia, Gansu and Xinjiang in particular), where most recent expansion has occurred. In most regions, too, long established agricultural practices are a natural barrier to conversion to wine-focused viticulture, though there has been some relief from this in the west.

Because of these constraints, domestic producers have resorted to external supplements to maintain the dominance of their brands in the rapidly expanding local market – bulk wine from other wine countries for blending, in particular, but also concentrates and extracts to boost local product – from Spain and France initially, but more recently from Australia, Chile and Argentina.

There is certainly a demand for imported bottled wine too, but not nearly as much as commonly thought. One of the longest established players in the import market segment, Don St Pierre Jr of ASC Fine Wines, puts it in perspective. He recently told IWSR Drinks Record (October 2007 edition) that “we are only now approaching the point in China where we can justify some of the optimism people have had about the market for the last ten years”. In 2006, imported branded bottled wine totalled about 2 million cases; and, as noted by St Pierre, 2006 was the first year China imported more wine than (relatively tiny) Hong Kong.
Also, while sales of locally produced wine are increasingly dispersed geographically, the market for imported bottled wine is much more geographically circumscribed – largely in Shanghai, Beijing and Guangzhou at this stage. Three firmly established national distribution agencies handle over half of all imported bottled wine. Relative newcomers, some basically opportunists, handle the remainder and most are very location specific.

Opportunities to sell more imported wine are available, but still modest. France continues to dominate the imported wine segment, with about 40 percent of recorded imports. After a very slow start, Australia has recently joined the top five import sources, with around a 10 percent share of China’s wine imports. China is currently Australia's ninth largest export market for wine but, at A$54 million in the 12 months to January 2008, this represents just 2 percent of Australia's total wine exports.

Looking forward, Australian players could be looking for opportunities to participate in other ways in this burgeoning market, including, as the French have already shown, by becoming part of the domestic production scene.

Each of today's domestic industry leaders has been, basically, a French-inspired outcome. Chateau Changyu, China's first Western-style winery, was established at Yantai with French input in the 1890s.

China’s second western-style winery, today’s Dragon Seal, was also a French inspiration, started in the suburbs of Beijing in 1910 by a French priest. It went through various formulations and, in 1987, was recast in its modern form. France’s Pernod Ricard became an equity holding joint venture party refreshing the business with its technology and expertise.
Great Wall has always been totally locally owned but was heavily resourced with French technical inputs. Dynasty, established in 1980 and initially entitled the Sino-French Joint Venture was, however, a more conventional joint venture, with Remy Cointreau holding a 33 percent equity stake and providing considerably greater direct foreign technical guidance. There have been at least a dozen other ventures over the past 20 years in which French interests have been paramount.

Australian involvement to this point has been modest, but not insubstantial. Hua Dong, the first Chinese winery to attract respectful international attention outside China, relied initially on Australian technical inputs when established by Hong Kong-based wine identity, Michael Parry, in 1983. Australian inputs have been ongoing in various formulations and the venture materialised on a typical ‘New World’ formula: it was the first Chinese winery to launch varietally labelled wines in China – a Chardonnay, a Rhine Riesling and a Gamay – and the first to declare vintage on the label. It stunned the discerning wine public when, in 1993, competing against top wines from Australia, New Zealand, California and Chile, it took out major awards at WINPAC in Hong Kong. This was followed by other awards at Vinexpo, Monde Selections at Brussels and New York Wine Experience.

Apart from this, though, there has been little corporate or institutional involvement from Australia in the emergence of the Chinese wine industry. That which has transpired has been more in the nature of personal undertakings (such as winemakers or viticulturalists working on period contracts) rather than any broader corporate or institutional commitment, and there has certainly been no national strategy.

There are some oddities – like the International Wine Culture Village, north of Beijing, with the full scale replica of Tasmania’s Government House, inspired by the developer’s connection to a Tasmanian vineyard – and a couple of recently reported small-scale ventures involving Australian equity parties or service providers. But this should be seen as a window of opportunity for the future by the Australian industry.