China Wine Investment Tragedy
Estimating the complete global wine market impact from an increasing pace of China wine investment activity has grown unsettling. For context, think of it in these drastic terms.
A couple of years ago I was driving around Zimbabwe and noticed Asian workers entering an energy facility. My driver explained that Chinese investors were acquiring mining resources and power plants across Zimbabwe. In the last decade the Zimbabwe economy was decimated from hyper inflation and often violent private land seizures at the hands of the locally feared and barely veiled Mugabe dictatorship. The economy went from Africa’s best to worst. I gave shoes and tee shirts to begging citizens that had their homes and farms seized, job opportunities vanish, and political freedoms wiped out. With 80% unemployment, worthless currency, and empty store shelves, every local I spoke with knew that Mugabe was the kind of guy that had no problem mortgaging his country’s mining, power, water, and coal resources to feather his own bed.
Could this development be any good over the long term for the citizens who should benefit most from these resources? The Mugabe faction has vowed to protect these Chinese investments for the purpose of economic recovery and learning from Chinese privatization models. While it is tough to believe anything coming out of the Mugabe propaganda machine, one thing is clear; the Chinese are able to make a handsome profit on their investments. And in the end, who will ever know how much of these rich local resources end up back in China without ever benefitting Zimbabwe’s economy and citizens?
What does any of this have to do with China wine investment? Admittedly, evil African leadership is dramatic context for Chinese investment in Bordeaux, but it’s not completely unfitting. I have written before about Hong Kong and mainland China’s auction markets supported by new Chinese millionaires and their certain contribution to the rising price of Bordeaux; putting these greatest wines out of reach of the average enthusiast. Not too long ago, fueled by Robert Parker’s western wine authority and scores, a case of Lafite sold for $47,000 in the first wine auction ever held in mainland China. The impact of the status seeking new Chinese millionaire, often with little appreciation for these wines, has already rippled through the wine economy and pushed Bordeaux prices sky high.
Ever more troubling, reports are surfacing that China is buying up Bordeaux with dirty RMB. Mainland Chinese money laundering is finding a welcome outlet in Bordeaux. Jane Anson, who writes about wine in Bordeaux, estimates that 50 Bordeaux vineyards are now under Chinese ownership. Anson also suggests it is not all bad since the sagging global economy hurt the region and the influx of capital is helpful. Sound like Zimbabwe? But these new Chinese investors are probably not buying these vineyards because they love the wine business and farming. If their money is dirty as reported, what can be known about the intentions of this new style investor in the world’s finest vineyards? Do they have good drinking and quality wine production as priority interests?
In Zimbabwe, it is not easy nor safe to raise questions about any of Mugabe’s actions. There is little that citizens can do to slow the transfer of their country’s best resources to China. But here in the US, and certainly in France, there should be vigilant reaction to letting the finest wine resources in the world fall into uncaring hands that might not manage these vineyards and winemaking facilities with the love and respect they deserve. China’s consumer market impact on the wine economy hurt collectors and enthusiasts. Buying up Bordeaux vineyards could end up compromising the actual product, and that would be a shame.
Yesterday in the South China Morning Post French investigators were calling for tighter controls and investigations into future Bordeaux investors. The newspaper’s report underscored just how challenging that will be, pointing out that “some of these buyers would use “complex judicial arrangements with holding companies located in fiscally privileged countries” to obtain these vineyards, making it difficult to establish the origin and the legality of the funds brought into France.”
Doubt China’s wine sensibility? How about this recent piece in Drink’s Business about a Filipino coconut wine being launched into China to capitalize on Asians’ growing thirst for coconut wines. The company makes a dry red, and a sweet white and red fermented from coconut sap. Anyone up for Chateau Coconut Latour?