What would happen if Chinese tastes changed and they drank as much wine per capita as the current world champions, the French? Well, that is a very interesting question, even if it isn?t a very realistic one. Annual Chinese consumption of wine is about a half-liter per capita and rising, according to my copy of The Global Wine Statistical Compendium. Wine consumption in France, on the other hand, is 55 liters per person and falling (it was more than 120 liters per capita in the early 1960s).
It is hard to imagine how Chinese wine consumption could rise to the current French level. It is unlikely that the French will sustain their current level for long. But it isn?t entirely out of the question that Chinese consumption could rise to the world average, which is about 3.5 liters per capita per year. Much of the increase [in demand] would probably be met by higher Chinese production; China is already a major wine producer?smaller than Chile but larger than Portugal in total production. But the global effects would be substantial and prices would surely rise.
We can already see some indication of the potential ?China Effect? in the market for fine wine. Everyone seems to think that at least some of the rise in Bordeaux prices in recent years is due to Asian and especially Chinese purchases. This trend seems likely to accelerate now that Hong Kong has eliminated its high tax on wine transactions. The latest Wine Advocate reports prices of 2005 Bordeaux that reach stratospheric levels?$500, $1500, $2500 per bottle! This is what happens when a global market focuses on an object of speculation?huge rents (excess returns) are created. As China (and India, too) become more completely integrated into global markets for products like fine wine, these rents will likely rise higher still.
?http://www.wine-econ.org
