The Political Economy of China’s Wine Industry: Retrenchment, Strategy, and Ambition

Harunori Umehara MSc in International Social and Public Policy (with Fudan) 

Since the early 2000s, China has emerged as one of the world’s largest import markets of wine, reflecting the rise of middle-class consumption and wine as a symbol of globalization and social prestige. However, after peaking in 2017, the consumption per capita has declined by a third of its peak by 2022, and more than halved its imports ①. The decline far exceeded that of the consumption of beer and spirits, revealing that the wine market in China is structurally sensitive rather than being integral to the market.

At the same time, geopolitical tensions shaped the wine sector’s global environment. In early 2021, following an anti-dumping investigation ② into Australian wine imports, China imposed tariffs of up to 218.4% ③ on Australian wine. While wine is not a critical commodity like semiconductors or energy, its observability and symbolism allow it to be a subject of economic signaling. 

Yet, domestic regions such as Ningxia and Yunnan have seen an increase in international investments and state support, often being compared to famous regions such as Bordeaux in France. This suggests that the Chinese government continued to support wine production despite the retrenchment. 

This article argues that examining China’s wine industry serves as a revealing example of the country’s contemporary political economy. Admittedly, wine only accounts for a marginal share of China’s total GDP. Still, monitoring the evolution of China’s growing wine industry may be politically revealing because it shows how the Chinese economy is changing as a symbol of globalisation and the growth of the middle class. The wine industry is a nuanced arena where trade, rural modernization, and politics intersect. Examining this niche political-economic lens provides insight into China’s statecraft and the positioning of industry policy-making in Asia. 

China’s Wine Market Before 2020: Rise and Constraints

The boom of wine in China during the 2000s and 2010s was primarily consumption-led rather than production-led. Even though wine has a long history in China ④, rice wine and distilled spirits dominated domestic alcohol. Since Deng Xiaoping’s economic reform ⑤, the consumption of imported wine started to rise, marking the growth of wine’s popularity. Over time, rising incomes, growing exposure to global trends, and urbanization increased interest in wine amongst middle and upper-class consumers in China. 

Furthermore, wine consumption in China was socially concentrated. It was more prevalent in urban regions such as Beijing, Shanghai, and Guangzhou, and was often associated with business, entertainment, and gifting. Chinese consumers deemed French wines prestigious, and later followed the boom of Australian wines, especially after the China-Australia Free Trade Agreement ⑥ in 2006. In this sense, the wine boom in China did not represent mass-market circulation, but rather an elite-oriented consumption bound to status and globalisation.

This led to consumption becoming structurally fragile. Beer easily penetrated the mass market, and other traditional drinks such as Baijiu were known for their deep roots in culture and rituals. Comparatively, wine struggled to be incorporated into the Chinese lifestyle. Hence, the boom of wine was tied to socio-economic factors rather than a gradual increase in consumption norms. While trends have slightly changed over the decades, this socio-political aspect still dictates Chinese wine consumption behaviour to this day. 

Tariffs and Statecraft: Wine as a Political Leverage

If the wine boom entailed structural fragility, then China’s tariffs on Australian wine reveal the sector’s political flexibility. Given the fact that Australia is China’s biggest wine exporter, the imposition of anti-dumping tariffs on Australian wine in 2021 marked a crucial point for the Chinese wine industry. With the high tariff, the annual trade flow of around U.S.$750 million was halted in 2021 ①. At the time, the decision unfolded amidst escalating diplomatic tensions between Beijing and Canberra over Huawei’s involvement in 5G development ⑦ and concerns over the origins of the COVID-19 pandemic ⑧.

Unlike energy or semiconductors, wine is considered to be a normal good and not strategic at the macro-level. Protectionist policies tend to target core industrial sectors and those that closely relate to national security supply chains. Given that wine makes up a tiny share of China’s GDP and is not directly tied to food security and the critical supply chain, wine makes it a strategic coercive instrument to pivot the growth of the sector. If the objective had been protecting the producers, then a more generalized protectionist measure would have been more consistent with the overall goals and actions of the trade war. Instead, while nuanced, China’s utilisation of the tariffs under the political timing allowed China to signal its stance and demonstrate economic pressure while attempting to avoid critical macro-sectors. In this way, the tariffs on Australian wine function less as a defense mechanism of domestic production, but more as an instrument of statecraft. 

Domestic Turn: State Ambition and Rural Revitalization

Even though consumption decreased and imports declined, domestic wine-producing regions have continued to garner attention in policy and investment, spearheading the transition of Chinese wine from a volume-based agriculture to a value-based one. At the forefront of the industry, Ningxia has been marketed as the model example of China’s viticultural development strategy. The autonomous region has received local subsidies, infrastructural investment, and promotional efforts ⑨ aimed at improving recognition domestically and globally. In parallel, similar investments have been emerging in other provinces‌, namely, French conglomerate LVMH’s investment in making Yunnan wine a globally competitive wine ⑩. 

These incentives align with China’s strategy to upgrade agriculture, diversify the rural economy, and reduce dependency on other countries. While wine is a minor part of China’s total economy, the phenomenon is used to China’s advantage to develop the agricultural sector, emphasizing branding through Geographical Indications (GIs) and moving towards high-margin products ⑪. Thus, this indicates that China’s investment in the wine strategy is a part of a transformation initiative to a high-quality agricultural sector. 

This connection becomes more apparent when considering the alignment of the growth of Ningxia’s wine sector to China’s “Go West Development Plan” ⑫. With the goal of reducing the economic gap between landlocked provinces and prosperous coastal cities, the State’s initiative to attract foreign investments and strengthen environmental protection of rural western regions allows for wine production to strategically position itself within the plan. Being next to the Gobi Desert, both the State and the local government’s initiative in avoiding desertification ⑬ of the region would simultaneously revitalize Ningxia’s economy and improve wine production for higher-quality products.

While the long-term impacts of such efforts remain ambiguous, unlike staple crops that rely on price stability and security, wine allows for branding, geographic differentiation, and high margins. Accordingly, viticulture becomes less of an agricultural output by volume, but more about fostering reputation-driven value within rural regions.

Strategy or Convenience?

The journey of China’s wine sector provides a niche insight into the political economy of contemporary China. Domestic promotion of wine appears to be consistent. Efforts to elevate Ningxia, Yunnan, and other wine-producing regions align with the national interest of ‌rural development, agricultural reform, and value creation. Furthermore, by putting effort into attracting international investments, emphasizing GI, and branding, Chinese wine represents a niche but coherent part of China’s agenda. Australian export tariffs have been lifted since 2023 ⑭, indicating an improvement in the situation. Thus, considering that the downfall of consumption has slightly risen back since 2023 and several wineries attracting major headlines in the international market ⑮, there might be room for some optimism within China’s wine industry. 

All combined, the trajectory of China’s wine industry demonstrates that state ambition in China does not always depend on economically heavy motives. Rather, marginal sectors may be strategically targeted because they offer developmental potential without systemic risk.

Sources 

① Kym Anderson, « What’s Happened to the Wine Market in China? », Journal of Wine Economics, Cambridge University Press, 2023.

② Ministry of Commerce of the People’s Republic of China, « Notice on the Final Determination of the Anti-Dumping Investigation into Imports of Wine from Australia », Ministry of Commerce of the People’s Republic of China, 2021.

③ Lewis Jackson, « China Lifts Tariffs on Australian Wine, Ends Three-Year Freeze in Trade », Reuters, 2 April 2024.

④ Demei Li, « The History of Chinese Winegrowing and Winemaking – Part 1 », Decanter China, 2020.

⑤ Kym Anderson, « China’s Wine Market: Recent Shocks and Long-Term Prospects », Australian National University, 2023.

⑥ Department of Foreign Affairs and Trade (Australia), « ChAFTA Fact Sheet: Agriculture and Processed Food », Department of Foreign Affairs and Trade, 2015.

⑦ International Institute for Strategic Studies, « Australia, Huawei and 5G », International Institute for Strategic Studies, 2019.

⑧ Daniel Hurst, « Australia Defends Plan to Investigate China over COVID-19 Outbreak as Row Deepens », The Guardian, 29 April 2020.

⑨ Michael Smith, « China’s Subsidies to Winemakers at Odds with Anti-Dumping Case », Australian Financial Review, 21 August 2020.

⑩ Claire Jiao, « LVMH Creates a New Wine Legacy in the Himalayas », Nikkei Asia, 2022.

⑪ Xu Yifan, « Review on Legal Supervision System of the Chinese Wine Industry », ResearchGate, 2022.

⑫ The State Council of the People’s Republic of China, « Premier Calls for Advancing Agricultural Supply-Side Structural Reform », The State Council of the People’s Republic of China, 27 December 2016.

⑬ Chris Devonshire-Ellis, « Ningxia: Small but Beautiful and Productive », China Briefing, 2021.

⑭ Export Finance Australia, « Australia Wine Exports to Recover Slowly after China Lifts Tariffs », Export Finance Australia, April 2024.

⑮ The Economist, « Wine from China Is Finer than Western Snobs Imagine », The Economist, 2 October 2025.