As a duty-free port, Hong Kong is an important hub for wine trading in Asia.
But the city’s high storage fees have hindered the development of the business.
Enter Qianhai Wine Innovative Management Co. Ltd.
One of the founders of the Hong Kong-mainland joint venture is veteran Hong Kong wine trader Thomas Yip.
The company plans to build a 100,000 square foot wine investment and exchange center in Qianhai, a special economic zone in Shenzhen, to provide storage and exchange services for wine lovers.
Mainland China is the largest wine export market for Hong Kong.
Official data shows that the value of the city’s wine entrepôt trade soared 101.3 percent to HK$3.29 billion (US$420 million) in the first nine months of this year from the same period last year.
More than HK$2.7 billion of that amount was exported to the mainland.
China imposes a heavy tax on wine imports.
Zhong Xiaohong, president of Qianhai Wine Innovative Management, said setting up a bonded wine warehouse in Qianhai provides importers of wine into the mainland with a crucial reduction in the tax payable up front.
“Wine merchants used to have to pay 480,000 yuan [about USD$75,000] in tax for every 1 million yuan worth of wine imported into the mainland,” Zhong said.
“But [if the wine is imported via Qianhai], they are allowed to pay the tax bottle by bottle after the wine is sold, and the [untaxed] leftover bottles can be returned to the international market.
“This will make wine merchants more confident in entering the Chinese market.”
The mainland does not have a classification or ranking system for wine, and so the regulator has to sample every imported batch, which is very time consuming.
The company, commissioned by the regulator, will try to set up a designation for “investment grade wine” and related standards as part of an effort to create a Chinese version of the London International Vintners Exchange (Liv-ex) index.
Zhong said China imports about 40,000-50,000 wine brands.
But only several hundred of them can be called “investment grade wine”. These include well-known wines from Bordeaux like Lafite-Rothschild.
She believes the new standards will be released next year.
Zhong said China is a major arena for wine retailing and investing, because the younger generation values quality and is less sensitive to price.
“The biggest issue in China is the adulteration of wine,” she said.
“When people pick up a glass of Lafite in the mainland, the first question they ask is not about its year of production or the flavor; it is whether the wine is adulterated or not.
“So I believe quality wines will have great market potential.”
Construction of the first phase of the wine center in Qianhai is scheduled to be completed around the Lunar New Year.
This article appeared in the Hong Kong Economic Journal on Dec. 7.
Translation by Myssie You
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