Vineyards and chateaux colonize China's remote hillsides - Feature

Beijing - "My wine's not the same as theirs," Liu Wenzhong said as he poured a tumbler of cloudy red wine at his home in Cizhong village in south-western China's Yunnan province.

Liu, 74, has been making wine a little longer than some of his neighbours and the scores of large companies that have jumped into viticulture in China over the last 30 years.

Perched above the upper reaches of the Mekong, dozens of rows of grapevines fan out around Cizhong's 100-year-old Catholic church, a giveaway clue that European missionaries made the first wine here.

Vineyards and churches across China became cornfields and barns during the early decades of the People's Republic of China, but both have made a comeback.

Yunnan, one of China's poorest provinces, is one of the major recent growth areas for wine production.

Liu said the government in Cizhong began the revival of grape-growing in 2004, much later than many other areas.

Old-growth vines from Cizhong have been used to produce hybrid grapes for the Yunnan Red Winery, which is best known for its Shangri-la-brand wines named after the Tibetan-style tourist town of Zhongdian, now officially named Shangri-la.

In 2007, Yunnan Red, which already had funding from a Hong Kong entrepreneur, attracted a 14-million-dollar investment from the US private equity firm Texas Pacific Group.

Dozens of other private investors, foreign wine producers and multinational drinks firms have already made similar commitments in China.

They are drawn by the rapid growth of China's urban middle class, which has fuelled double-digit growth in wine sales. Wine bars and exclusive clubs have sprouted in cities like Beijing and Shanghai.

Yunnan Red was among more than 400 mostly state-run wineries set up by 1997, and that number had increased to more than 600 last year, according to government reports.

The overall market is still dominated by three state-run giants - Great Wall, Dynasty and Changyu - but many smaller firms are finding niches in China for producing or importing wine.

China is already the world's number-eight wine consumer and ranks 10th in production, according to international exhibitors Vinexpo.

State media recently forecast total revenue of some 13.7 billion dollars this year, up from 10.5 billion dollars in 2007, despite the global financial crisis curbing market growth in 2008-09.

By volume, annual wine sales are expected to hit around 1.1 billion bottles, or 828 million litres, next year, roughly double the 2007 total, according to a forecast by the London-based International Wine and Spirit Record.

Yet annual per-capita consumption among China's 1.3 billion people is still only around 0.5 litres, meaning there is no let-up in the 20-year quest for pole position in the world's fastest growing major market for wine.

"Today in China, the professionalization of the wine sector, with a public eager for more and more information, not to mention the existence of over 300 million wine drinkers to win over, heralds a bright future," the French Castel group said in late May at the Vinexpo Asia event in Hong Kong.

As well as importing 13 million bottles of French wine last year, Castel is cooperating in local production with Changyu, which claims some 30 per cent of the Chinese market.

High local taxes, the reduction of import tariffs under World Trade Organization rules, and rapidly rising consumption have all helped to bring down the price of imported wines over the last decade.

China appears undaunted by the imports. Like those in Cizhong and other areas of Yunnan, many local governments are supporting new, large-scale growing and production programmes, particularly in poorer areas with cheap labour and more land.

Bayan Nur city in the northern region of Inner Mongolia announced plans in May to develop 27,000 hectares of vines in an arid zone.

The city government aims to produce 600,000 tons of grapes and 400 million litres of wine annually within a decade, creating 60,000 jobs and annual revenue of 160 billion yuan (24 billion dollars).

Similar projects are under development in several other areas, including the neighbouring arid region of Ningxia, the far western region of Xinjiang, the northern province of Hebei and the eastern province of Shandong.

But the rapid growth of local wines, which still account for nearly 90 per cent of sales volume, has meant a continuing focus on quantity rather than quality for most Chinese producers, forcing down prices.

Commercial dry red wines from Great Wall, for example, sell for as little as 20 yuan (3 dollars) a bottle in supermarkets.

Although some connoisseurs rate a few Chinese premium wines, those are often overpriced compared with similar imports.

At last year's Shanghai International Wine Challenge, billed as China's leading independent wine competition, all awards were claimed by imported wines, most from Australia and New Zealand.