China’s Bubble Bursting?

China is the world’s fastest growing wine market with consumption, production and imports increasing annually and the rest of the wine world furiously attempting to get into the market before it really ‘explodes into life’. But, the new regime (government) that was put into place last November has implemented measures curbing the expenditure of all government officials around the country and the wine market has been hit hard by this clamp down in spending. Almost immediately, wine importers in China told us they had seen a slowdown in demand for all wines, (not just fine wines as expected) as the lower ranking officials had their budgets cut to the point where wine purchasing is just not feasible.

This has been a hot topic in Hong Kong as many of the wines imported into Hong Kong are re-exported into China and local Hong Kong companies have been feeling the pinch as the central government counts its pennies in a bid to curb excessive expenditure.

If this was not bad enough for the image of the future of wine in China (the government there are in power for 10 years remember, so it will take a back down by the government for expenditure to rise again – something rarely attempted by the stoic Chinese central government) it was announced last night by Chairman of Vinexpo Overseas, Xavier de Eizaguirre that they are to cancel the scheduled Vinexpo Beijing 2014.

“While our focus is for now on the ‘mature markets’ of Hong Kong and Tokyo, we are confident there is potential in northern China for the wine and spirits industry. We are also convinced that Beijing, where important decisions are taken, a seat of power and a city with a highly developed ‘On trade’, will be an essential place for the wine and spirits industry to be present”, Mr. de Eizaguirre said whilst addressing attending local media and industry professionals in Hong Kong’s Grand Hyatt hotel last night.

He also attributed the decision to temporarily suspend its initiative in Beijing to a ‘momentary pause’ in emerging market demand, as well as acknowledging the financial burden on winemakers to be present at an increasing number of wine and spirits trade events.

Does this indicate a lack of confidence in the China market? Hard to say and potentially not, but as Vinexpo Nippon 2014 is still scheduled to go on next year, with an estimated 3000 visitors (Hong Kong had just under 16,000 visitors to Vinexpo Asia Pacific 2012) one would assume that, potentially, more than 3,000 visitors would visit Vinexpo Beijing and, in my humble opinion, it would be more beneficial to promote wine in an emerging market – rather than Asia’s most mature market.