China further reduces tariffs on Australian wine

At a time when Australian wine exports to China are at an all time high, China has further reduced tariffs on Australian bottled and bulk wine, which is set to boost Australian wine exports to the country.

Officials from China and Australia signing the bilateral Free Trade Agreement in 2015

Starting from 1 January, 2018, import tariffs on Australian bottled wines to China have been cut from 5.6% to 2.8%, while tariffs on bulk wine have been reduced to 4%, based on the two countries’ Free Trade Agreement signed in December 2015. The agreement paved the way for a reduction in tariffs over a few years until 2019, when they will be completely scrapped.

In the first year after the FTA agreement, China’s demand for Australian wines surged. In September 2016, the country became Australia’s top export destination, outstripping the US as its top value market, according to Wine Australia.

Mainland China’s position as the number one destination for Australian wine exports by value was consolidated during the years 2016 and 2017. Exports grew by 44% in value to AU$607 million, according to figures released by the country’s trade organisation.

In China, Australian wine’s market share has been steadily growing. By the end of November in 2017, Australia had a 27.1% market share in terms of market value, following France’s 41.1%, based on figures just released by the China Association of Imports and Exports of Wine & Spirits.

In its most significant development, Australia, in the single month of October, surpassed France as China’s biggest source of imported bottled wine for the first time.

Although France reclaimed its position in November, Australia registered the highest value growth rate of 111.3% year-on-year. About 10.6 million litres of bottled Australian wine worth over US$80.67 million was shipped to China, slightly shy of France’s US$96.65 million, based on the Chinese trade organisation’s data.

Wine Australia’s pavilion at ProWine in Shanghai

Leading Australian wine companies such as Treasury Wine Estates was among the biggest beneficiaries of China’s Australian wine boom, which had contributed to its 55% profit rise in the 2017 financial year.

In addition to wine consumption, Chinese consumers’ growing interest in Australian wines spawned a profitable wine tourism industry to Australia and winery purchases.

Major tour operator AAT Kings reported a steep increase in tours from 38 in 2013 to more than 700 in 2016. In 2017, more than 1.33 million Chinese people visited Australia, spending AU$10 billion, reported The Daily Telegraph. 

Meanwhile, the Chinese are quick to buy up Australian vineyards. Changyu Pioneers, the oldest winery in China, spent AU$26 million for an 80% stake in Clare Valley-based winery Kilikanoon last month.

Wei Long, another Chinese winery based in Shandong province, also announced its plan to invest AU$120 million across the country in land and processing facilities, according to Australian Financial Review. 

The lure of Australian wine has also attracted the China’s leading wine merchants. Australian Vintage (AVL), the parent company of the McGuigan, Tempus Two and Nepenthe wine brands, attracted a lucrative financial investment from YesMyWine, China’s biggest online wine retailer, which will raise AU$16.5 million in capital.

To date, China has signed FTA agreements with a few wine producing countries including Australia, New Zealand, Chile and Georgia.