The impact of the US Trade policy on the Chinese Vine Market

Since the turn of the millennium, China’s GDP per capita has steadily rose. The largest middle class in the world, that exists in China is now more and more able to afford quality food, not least as a result of the campaign against corruption, waste, and luxury under Xi Jinping. In addition to the booming demand for beef and ‘superfood’ like donkey-hide gelatine, the inclination to buy wine grows as well; extraordinary in the last few years.

To service nearly the entire domestic demand the vineyard area in China has also risen in recent years. As a result in 2014 China overtook France to become the second largest wine-growing area in the world behind Spain, according to the International Organisation of Vine and Wine (IOV). In line with that, the Chinese vine crop protection market has more than doubled from some US$ 56 to 117 million during the period between 2013 and 2016.

Due to import taxes for vine coming from the USA, the price in China for US wine has also increased. The Wine Institute of California is consequently concerned that the market shares in what was previously a growing export market will now be lost. As a result, the domestic production is in a well-placed position to fill in the gap. Due to increasing demand and on the other hand increasing pest pressure, the crop protection market is also expected to grow in the short term. 

Source: database amis®AgriGlobe®

Data is presented at ex-company level, represents harvest year and is calculated using average year exchange rates.

With regard to the cultivations conditions, those in China are quite varied. At least 3 regions from the 12 existing growing areas stand out.

Shandong Province is characterized by a Mediterranean climate. On the one hand warm summers and mild winters simplify the viticulture, on the other hand, an increased air humidity encourages diseases and pests. Apart from the Southwest Wine Region, the area around Shandong is the only one in which there is no need of artificial protection in winter. Along with the Hebei Province, Shandong accounts for more than a half of the wines in the Chinese wine industry by yield as well as an output value, above all the coastal city Yantei.

Ningxia has good conditions of light and warmth. Although it has an arid and semi-arid climate, it is easy to carry out manual irrigation thanks to the Yellow River that flows through the area. What is more the territory borders in the northwest to the Loese Plateau, which has Loess Soil often considered the best for wine production.

Ningxia Helan-Mountains is the most famous Chinese wine-producing region, not at least because of the production of high-quality wine that is similar to Bordeaux blends which have won different domestic and international wine competitions. The wine industry there occupies the most important position in the economic development of the region.

Xinjiang with its extreme temperatures shape the viniculture, which means up to 35°C in midsummer and down to -25°C in the deep of winter. Like in many others wine-growing areas of China these are weather conditions, which a vineyard would not survive without burying them in winter – a great effort for the rural workers, and also an extra pressure in view of soil pests. Nevertheless, Xinjiang is certainly the region with the largest wine grape production in China, even if it is a remote region and so suffers in terms of means of production and product transport.

It should be noted that in many Chinese wine regions the summer is quite hot and humid, either because of torrential rain, floods by melt water or because of flooded rivers. These incidents are both a curse and a blessing. Obviously, the water is necessary for healthily growing vines, but the disease and pest pressure is very high at this time and as a result demand of plant protection is also high.

Indeed, not only the humidity hampers the work of winegrowers.

In Ningxia, in the Helan Mountain East Region more than 7000 grapevines needed to be burned in April 2017. The vines were destroyed in part because of virus infection and in part because of a precautionary measure. Many vines introduced to the region in the 1990s were carriers of viral disease, according to Chinese wine authority. Already in spring 2014 about half a million grapevines were controlled destroyed by fire. As per China’s National Forestry Administration, a leafroll-associated virus infected a number of plants as well; three years later.

Whereas in 2014 the leafroll-associated virus 1 (GLRaV-1) infected thousands of plants, in 2017 not one but two of these (GLRaV-1 and GLRaV-3) were identified. The virus spread with help of different mealybugs and scale insects.

Incidents like these show that more and more diseases and pests (asides the big three – mildew, oidium, and botrytis) appear and that there is a rising necessity of different plant protection in China. The existing product portfolio for the growers offers them solutions for most of the fungal, bacterial and insecticide treatments. Apart from the synthetic crop protection products, the biological segment provides a broad spectrum.

With the boom of wine consumption in the country with the largest number of people, a new world order in grape production is dawning. After France, China may well also overtake Spain to become the largest wine-growing area in the world.

Although the request of donkey-hide gelatine may well decrease, rising incomes, reduction of wine prices and the changed social meaning of drinking wine will continue fostering Chinese consumption of wine.  This will lead to a continual development of the wine production industry. Through the fact that the increase in demand, especially of Chinese wine, will rise steadily, China needs more than ever better pest management for grapes.

In a word, the demand and value of vine crop protection products (biological and conventional) in China will grow continuously within the next few years. Not only driven by the growing domestic demand, but also influenced by the trade policy between China and the USA.

Written by Markus Bockholt, Junior Data Analyst