EU warning on China food certification changes
The European Commission has warned China is planning to introduce what Brussels calls "unjustifiable food certification requirements" for imports into the country.
The alert comes in a new annual report released today (27 June) from the EU executive on international trade and investment barriers, looking at developments in 2016 and upcoming changes.
In the report, the Commission said China has plans to impose new certification standards on confectionery, chocolates, biscuits, jams, compotes and other fruit preparations, milled products and grains, breakfast cereals, noodles and pasta.
Meanwhile, closer to the bloc, the report noted Switzerland, which remains outside the EU, last year restricted meat exports from the member states by reclassifying tariffs for seasoned meat, significantly increasing the charges. The report added even though the Swiss government later reduced duties for seasoned meat "imported for the purpose of producing dry meat", importers will still have to prove upon request the meat has been imported for that purpose. "As a result, part of EU exports will continue to be subject to the higher duties," said the report. Officials from the Commission's directorate general for trade have raised these problems with the Swiss government, it added.
Meanwhile, Russia – which still imposes a comprehensive import ban on EU food exports – also last year extended longstanding restrictions preventing foreign companies from bidding for government procurement contracts regarding food supplies, noted the Commission report.
On the plus side, the report noted South Korea had eased technical requirements for EU exporters of raw milk cheese wanting to secure access to Korean sales channels.
And Ukraine repealed a longstanding health-based ban on imports of EU-made beef and veal, although some import conditions still clash with some Brussels standards, said the report. It also welcomed Ukraine scrapping a quarantine permit for imports of vegetables from the EU, including cargoes transiting Ukraine territory.
Source: Just-Food.com Date: 2017-07-04
China’s New Pesticide Regulations Become Effective
On June 1, 2017, in the People’s Republic of China (China), a newly revised Regulation on Pesticide Administration (RPA) became effective. The newly revised RPA was approved during the 164th executive meeting of the State Council of China on February 8, 2017 and published as Decree Number 677 of the State Council of China (China Decree 677) on April 1, 2017.
The first version of the RPA became effective on May 8, 1997, and was revised on November 29, 2001, by China Decree 326. China Decree 677 makes significant changes to the current version of RPA (China Decree 326), and requires the Ministry of Agriculture (MOA) to formulate relevant rules and measures for its implementation. The revised RPA includes eight chapters: General Provisions; Pesticide Registration; Production of Pesticides; Distribution of Pesticides; Uses of Pesticides; Supervision and Management; Legal Liability; and Supplementary Provisions.
On March 17, 2017, the MOA released five implementation measures for public comments, but did not provide an implementation date. The measures include: Pesticide Registration Management Measures (Draft); Measures for the Management of Pesticide Production License (Draft); Measures for the Administration of Pesticide Business License (Draft); Measures for the Administration of Pesticide Labels and Manuals (Draft); and Measures for the Management of Tests Used for Pesticide Registration (Draft).
The new RPA is intended to: streamline the administration process; implement licensing systems for pesticide production and distribution; promote the reduction of pesticide uses and enhance the management of highly toxic pesticides; clarify the responsibilities of manufacturers, sponsors of the contracted manufacturers, and distributors for the safety, efficacy, and quality of pesticides; establish pesticide recall and pesticide waste recycling systems; and prevent and punish the adulteration of pesticides. The new RPA also revises the registration process and labeling requirements of pesticides, removes temporary pesticide registration, includes increased fines and blacklisting, and requires that manufacturers and distributors/retailers of pesticides establish a tracking system and maintain the required records for at least two years.
Commentary
The new RPA significantly changed registrations for pesticides in China. Temporary pesticide registration is no longer an option. There were two registration review committees: the Temporary Pesticide Registration Review Committee that held a review meeting every two months; and the Full Pesticide Registration Review Committee that held a review meeting every six months, before the new RPA became effective. The two committees are being replaced by the National Pesticide Registration Review Committee, but no frequency of review meetings was provided. It is expected that the National Pesticide Registration Review Committee will meet less frequently than once every two months, which may result in a longer timeline for review and approval. Without temporary pesticide registrations, a full set of data will be required with every pesticide registration, including two-year stability data in the initial submission. Therefore, the new pesticide registration process may extend the time for manufacturers to bring products to the Chinese market.
The new RPA requires the foreign registration of active ingredients; possibly new formulations will obtain the registration in another country before registering it in China.
In addition, the Pesticide Registration Management Measures (Draft) requires that chemistry and toxicology tests should be completed in laboratories approved by the MOA or overseas laboratories maintaining mutual recognition agreements with the Chinese Government and complying with Good Laboratory Practices (GLP), and that efficacy, residue, and environment tests shall be conducted in China. Since China is not a member country of the Organization for Economic Cooperation and Development’s (OECD) Mutual Acceptance of Data (MAD) system, this proposed requirement could reject all test reports from overseas for pesticide registration in China. It also requires that literature or data in a foreign language shall be translated to Chinese, but is not clear if the whole article/reports or only the summary should be translated into Chinese. The timeline for new data requirements on pesticide registration under the new RPA is not provided. Many questions for pesticide registration under the new RPA remain.
Source: The National Law Review Date 2017-07-04
Antibiotic Resistance Is Lurking in The Environment
Colistin is an antibiotic of last resort, one of the final options left when all other drugs fail. It is an older antibiotic and sometimes toxic to the kidneys. Yet precisely because colistin is not a particularly safe drug and thus rarely used, bacteria didn’t develop resistance to it.
Until they did, of course. At first, the occasional resistance mutation popped up, here and there. Then in 2015, scientists surveilling Chinese pig farms reported the discovery of Escherichia coli bacteria with colistin resistance in a form that can spread with frightening ease. The resistance gene, which they called mcr-1, lived on a free-floating loop of DNA called a plasmid. Bacteria—even bacteria of different species—can swap plasmids back and forth. Just seven months later, another group in Belgium found a second, similar gene, mcr-2. And this week, the original group of scientists reported a third this time more distinct, colistin-resistance gene, mcr-3, also on a plasmid and also found in E. coli from a Chinese pig farm. That plasmid where the researchers found mcr-3 also contained 18 other resistance genes against other antibiotics.
Researchers think they have another reason to worry about mcr-3. This resistance gene is very similar to a naturally occurring gene in Aeromonas, a type of bacteria ubiquitous in fresh and brackish waters. It could be that mcr-3 developed in Aeronomas in the first place, and though it’s not yet confirmed, these bacteria may be a reservoir of colistin resistance. “mcr-3 might exist everywhere,” says Yang Wang, a biologist at China Agricultural University and an author on the new report. Colistin resistance could be even more widespread than we thought.
The case of mcr-3 illuminates the complex interplay between antibiotics and the natural environment, which scientists are only just beginning to understand. It makes sense to find resistance genes in hospitals or on farms, where antibiotics are used to treat humans or animals. But why would antibiotic resistance genes turn up in bacteria from the natural environment—even in an isolated cave or 30,000-year-old permafrost? Does the natural environment harbor a reservoir of antibiotic resistance genes, waiting to spring into action?
First, some history about colistin. Decades ago, as colistin fell out of favor for human medicine, farmers started using it. Small doses of antibiotics can fatten pigs and chickens, so colistin became a growth promoter added to feed. China has been a major user of colistin in agriculture, and it’s Chinese scientists who first detected the mcr-1 resistance. But the drug has also been used worldwide in various ways, from promoting growth to preventing and treating diarrheal diseases in animals. (This year, China banned the use of colistin as a growth promoter, and Europe is cutting down on its use on its use in prevention. Treating sick animals with it is still allowed, though.)
Infections resistant to multiple drugs—the kind that might require resorting to colistin—are thankfully still rare, and they’re mostly a concern for the already sick and immunocompromised. But if colistin resistance becomes more common, these patients would lose one of their only remaining options.
So the bombshell discovery of mcr-1 set off a search through bacteria collections around the world. And soon enough, researchers found mcr-1 in dozens of countries, even in decades-old samples of Enterobacteriaceae, a group of bacteria that includes E. coli and Salmonella. The gene had spread around the world before scientists even knew to look for it.
“Environmental bacteria are just chock full of resistance genes.”
Unfortunately, the same thing has probably already happened with mcr-3. In fact, when Wang and his coauthors went to compare the DNA sequence of mcr-3 to previously sequenced bacteria, they found three 100 percent matches—in Enterobacteriaceae from a Malaysian pig in 2013, human pus in Thailand in 2015, and human stool in the U.S. in 2008.
What makes mcr-3 different from mcr-1 is the existence of mcr-3-like genes in a whole different group of more distantly related water bacteria, the Aeromonas. For example, one bacteria sample from Malaysian lake water had 94.1 percent similarity to the enzyme encoded by mcr-3. And some Aeromonas species seem to have intrinsic resistance to colistin’s class of antibiotics. Wang is now working to isolate the mcr-3-like gene in Aeromonas to figure out if it is indeed what gives the bacteria resistance to colistin.
What could Aeromonas be doing with a colistin-resistance gene out in the environment? This kind of scenario is actually quite common. “Environmental bacteria are just chock full of resistance genes,” says Gerry Wright, a biochemist at McMaster University, who has looked in places like permafrost and isolated caves for resistance genes. One answer could be that bacteria are protecting themselves. Many antibiotics actually come from microbes, which may be creating toxins to fight off their microbe competitors. In fact, colistin was first isolated from a flask of bacteria in Japan.
But chemical warfare between bacteria isn’t the only way to think about the existence of natural antibiotics. The antibiotics we’ve isolated from microbes often don’t exist at high enough natural concentrations to actually kill other bacteria. Perhaps, what we think of as antibiotics are really signaling molecules that bacteria use to communicate with each other. “These are very complex ecosystems that have hundreds and thousands of species in some way communicating with each other,” says Justin Donato, a biochemist at University of St. Thomas. And what we think of resistance genes might just be there to modify signaling molecules.
Of course, in high enough concentrations, the compounds that may originally have been for signaling and that humans use as antibiotics, become lethal. Then natural selection kicks in. The genes used in bacterial communication could then be co-opted for antibiotic resistance. That may be what happened with mcr-3 andcolistin. Perhaps a pig drank water with Aeromonascarrying mcr-3 or an mcr-3-like gene, which then encountered E. coli in the pig’s gut and eventually passed along the gene on a plasmid, giving the E. coli resistance to colistin.
In one view, the case of mcr-3 illustrates how little we know about complex bacterial communities, and how sources of antibiotic resistance may lurk in unexpected places. But seen another way, it shows just how predictable the larger pattern is: Bacteria always find a way to become resistant.
Source: The Atlantic Date: 2017-07-04
Over $13 billion spent on agriculture restructuring
Prime Minister Nguyễn Xuân Phúc has approved a target programme to restructure the agricultural economy, prevent natural disasters and stabilise people’s lives with total capital of VNĐ306.66 trillion (US$13.5 billion).
The programme, implemented from 2016 to 2020, will upgrade the seed producing establishments at central and local levels; invest in the construction of synchronous infrastructure for some key seed producing regions; produce a variety of seeds; and assist enterprises to implement projects in the field of special preferential investment.
The programme will support 2,000 newly established cooperatives and reorganise 90 per cent of existing agricultural cooperatives in accordance with the Law on Cooperatives in 2012.
It will consolidate and renovate some 650km of sea dykes and 550km of river dykes; proactively prevent and limit damage caused by natural disasters; and repair, upgrade and ensure the safety of 1,150 small and medium water reservoirs to provide sufficient fresh water for the population of 12 large islands.
The programme also aims to stabilise the lives of ethnic minority nomad households and about 11,500 households in disaster-prone areas; and resettle households in the wake of irrigation and hydropower works.
It is also designed to help the cultivation and animal husbandry sectors carry out restructuring in a modern way to create high added value and sustainability and contribute to raising the annual growth rate of cultivation to 2.5-3 per cent and husbandry to 4-5 per cent.
Source: VNS Date: 2017-06-04
Robots to go fishing in Dalian
A leading Chinese fishery company and the Dalian University of Technology have established a laboratory to develop underwater robots, which are expected to take the place of divers to catch precious seafood.
The robots will also likely perform seabed monitoring tasks at fishing grounds in Dalian, Liaoning province.
"We're dedicated to developing robots that can work as flexibly and efficiently as experienced divers in the complicated circumstances under the sea," said Wu Hougang, president of Zoneco Group Co Ltd, which is listed on the Shenzhen bourse.
The company employs dozens of divers to pick up precious seafood such as trepang (a type of rare sea cucumber), sea urchins and abalone from the sea floor about 20 to 30 meters from the surface. They work about three to four hours per day.
"The robots will help reduce risks and costs," said Wu.
According to the agreement between the two parties, the lab will carry out innovation of underwater robots focusing on tasks such as environmental perception, underwater observation and ecological monitoring.
The company and the university will also work together to solve technological problems, develop products, and promote the application of technological results.
The lab is expected to be a model for the integration of technology with finance, as well as the collaborative research and development between research institutions and big companies.
Zoneco will provide 300,000 yuan ($43,480) annually to the lab.
The National Natural Science Foundation of China will support the construction of the lab, said Deng Fang, a project director with the foundation.
"Currently, industrial robots and aerial robots are enjoying rapid development in China while the research and development of underwater robots is relatively slow," said Deng.
Some other universities and research institutes, including Peking University, Harbin Engineering University and Beijing-based Beihang University, will provide technical support to the lab.
Guo Dongming, president of the Dalian University of Technology, said the cooperation will promote industrial upgrading through new technology, make progress in the areas of underwater robots and maritime information, and help boost the maritime economy in China.
Source: China Daily Date: 2017-06-04
China creates "estate wine" trademark
Sixteen wineries in China – from Beijing, Hebei, Xinjiang and Ningxia – are close to receiving the “estate wine” quality trademark. This is part of the government’s efforts to establish official quality standards.
A professional trade committee, organised by China Alcoholic Drinks Association (CADA), conducted a series of audits and tasting assessments.
As reported by the wine magazine Decanter online, these producers are currently at the final stage of the process and are highly likely to be approved to carry the designated “estate wine” trademark in July, according to CADA.
The move marks China’s first steps towards an official regulation system for quality wine production.
To qualify for the “estate wine” trademark, producers need to have full control over their vineyards, and produce and bottle their wines on site.
The yield limit for these estate wines is at 1000kg of grapes per mu (approximately 94-115 hectolitres per hectare depending on white or red wines), according to CADA.
As for geographical indication (GI) marks, China has so far issued several to domestic wine producing regions, including Helan Mountain, in the east of Ningxia.
Unlike EU appellation laws, the Chinese GI regulations “had little actual effect in the market because it is far less forceful than the trademark law,” said Chinese wine authority Professor Li Demei in a previous DecanterChina.com column.
By encouraging quality producers to apply for the estate wine trademark, which is owned and endorsed by CADA, the association aims to “protect the reputation of Chinese estate wine producers in domestic and overseas market”, said officials.
Source: NewEurope Date: 2017-06-03
China Addresses Soil Pollution with Agriculture Reforms
As China’s pork industry continues to expand, the country will need to address a greater problem lying just beneath the surface—soil pollution.
According to a national soil survey from the Chinese government in 2014, 19,4% of the country's farmland was polluted by chemical contaminants and metals such as lead, cadmium, and arsenic. Overall, 2% of China's land is too polluted to even use for farming anymore. That’s around 11,800 square miles—roughly the size of the entire country of Belgium.
Increased industrialization across the country has led to an excessive amount of toxic materials building up in the soil over time. Mining, energy production, waste incineration, manufacturing processes, and even agricultural uses all contribute to soil pollution. Failure to address the problem early on means that some land is now completely unusable and unsalvageable.
To prevent the problem from worsening, China plans to treat waste from its livestock breeding programs to reduce agricultural pollution . The country also intends to implement tougher penalties for contributing to pollution, prohibit construction in areas with contaminated soil, and increase the use of animal waste as fertilizer instead of chemical fertilizers. As the world’s largest pork producer, accounting for roughly half of global production, pursuing these agriculture reforms is in the country’s best interests—should China fail to protect its farmland, it could prove to be a rocky future for its pork industry.
Source: Farm Journal's Pork Date: 2017-06-03
A joint project explores the sustainability of China's poultry industry
Milestone results of a three-year joint project looking into the sustainability of China’s fast-growing poultry industry were recently announced in Beijing.
The China Food Security Project is a collaboration among Sealed Air — a US company whose businesses cover food packaging solutions, cushioning and cleaning and hygiene solutions, World Wildlife Fund as well as the China Chain Store & Franchise Association, with supports from the Institute of Agricultural Economics and Development at the Chinese Academy of Agricultural Sciences.
The project aims to help improve China’s poultry supply chain, both to meet consumer needs and mitigate environmental as well as social impact of poultry production on the country’s ecosystem.
The program started in 2014 with various work-streams, including an in-depth study of China’s poultry supply chain from slaughter to consumption in East China.
Research was conducted into each step of the supply chain, the various poultry circulation models such as wet markets versus supermarkets, and the key entities involved.
The study found that potential risks exist along the supply chain that impacts the quality and safety of poultry products. For example, the H7N9 bird flu outbreak in China in 2013 cost the country’s poultry industry more than 60 billion yuan ($8.8 billion).
Based on these findings, it identified opportunities to standardize the processes and specifications for slaughtering, storage and distribution, and to establish higher standards on quality and risk control.
“From farming right down to consumption, each private and public entity, including consumers, plays a critical role in enhancing food security and reducing food waste,” said Stefan Phang, Sustainability and CSR director for Sealed Air Asia Pacific.
A best management practices guide was created with a comprehensive checklist of food safety practices and procedures that can help reduce the loss of product due to contamination and spoilage along the poultry supply chain.
Another key program milestone was a quantitative environmental evaluation of different supply chain systems for packaged and unpackaged chicken, from farming to retail.
It suggests that a supply chain that incorporates improved farm processes, packaging and cold-chain methods has the potential to reduce greenhouse gas emissions by over 20 percent.
According to the report, China’s poultry industry is the second-largest in the world. In 2014, Chinese poultry production reached 17.5 million tons, a tenfold increase from 1985, and is expected to reach 20 million ton by 2020.
In light of this growth, China’s poultry industry has significant opportunities to increase access to safe, nutritious food while helping to conserve natural resources and preserve vital ecosystems, it says.
The China Food Security Program is nearing its completion and the program collaborators are now embarking on industry and consumer engagement efforts to help key stakeholders make informed choices on quality control, safety risk mitigation and waste reduction.
Source: China Daily Date: 2017-06-03
A joint project explores the sustainability of China's poultry industry (2)
Milestone results of a three-year joint project looking into the sustainability of China’s fast-growing poultry industry were recently announced in Beijing.
The China Food Security Project is a collaboration among Sealed Air — a US company whose businesses cover food packaging solutions, cushioning and cleaning and hygiene solutions, World Wildlife Fund as well as the China Chain Store & Franchise Association, with supports from the Institute of Agricultural Economics and Development at the Chinese Academy of Agricultural Sciences.
The project aims to help improve China’s poultry supply chain, both to meet consumer needs and mitigate environmental as well as social impact of poultry production on the country’s ecosystem.
The program started in 2014 with various work-streams, including an in-depth study of China’s poultry supply chain from slaughter to consumption in East China.
Research was conducted into each step of the supply chain, the various poultry circulation models such as wet markets versus supermarkets, and the key entities involved.
The study found that potential risks exist along the supply chain that impacts the quality and safety of poultry products. For example, the H7N9 bird flu outbreak in China in 2013 cost the country’s poultry industry more than 60 billion yuan ($8.8 billion).
Based on these findings, it identified opportunities to standardize the processes and specifications for slaughtering, storage and distribution, and to establish higher standards on quality and risk control.
“From farming right down to consumption, each private and public entity, including consumers, plays a critical role in enhancing food security and reducing food waste,” said Stefan Phang, Sustainability and CSR director for Sealed Air Asia Pacific.
A best management practices guide was created with a comprehensive checklist of food safety practices and procedures that can help reduce the loss of product due to contamination and spoilage along the poultry supply chain.
Another key program milestone was a quantitative environmental evaluation of different supply chain systems for packaged and unpackaged chicken, from farming to retail.
It suggests that a supply chain that incorporates improved farm processes, packaging and cold-chain methods has the potential to reduce greenhouse gas emissions by over 20 percent.
According to the report, China’s poultry industry is the second-largest in the world. In 2014, Chinese poultry production reached 17.5 million tons, a tenfold increase from 1985, and is expected to reach 20 million ton by 2020.
In light of this growth, China’s poultry industry has significant opportunities to increase access to safe, nutritious food while helping to conserve natural resources and preserve vital ecosystems, it says.
The China Food Security Program is nearing its completion and the program collaborators are now embarking on industry and consumer engagement efforts to help key stakeholders make informed choices on quality control, safety risk mitigation and waste reduction.
Source: China Daily Date: 2017-06-03
Why Chinese investors are snapping up Bordeaux vineyards
In a small city in eastern China, a new $900m theme park has just opened. Set over 1,000 acres and built with the help of the designers of Disneyland, it has an Italian-style castle at its centre, transporting you to straight to Tuscany.
This is not meant to evoke a fairytale, but instead to celebrate and educate visitors on China’s newest obsession: welcome to Wine City.
Set up by China’s oldest winemaker, Changyu, it is surely a contender for the world’s most surreal day out. At peak capacity it will produce 450,000 tons of wine a year; it also has a research institute designed to appear like an oak barrel surrounded by towering champagne flutes.
It’s the latest in a rush to accommodate the changing tastes of the burgeoning middle class. In 2014, China overtook France as the biggest consumer of red wine, and it is on on track to become the second biggest consumer of wine in the world by 2020, drinking 6.1bn litres, worth $21.7 bn, which is up 39.8pc from 2016, according to International Wine & Spirit Research.
Much of this wine is made in Chinaby companies such as Changyu, which produces brands such as ‘Great Wall’ and ‘Dynasty’. Such is the demand that China is setting up its own answer to Bordeaux in Ningxia Hui Autonomous Region, 600 miles west of Beijing. There, entrepreneurial vintners, some of whom have trained in oenology in France, have set up chateaux on the edge of a desert where temperatures fall to -25 degrees.
But the share of imports is growing, up by 37pc last year, as tastes become more refined. Last year, China imported 642m bottles of wine, worth $2bn; 40pc of that comes from France. Earlier this year, a train carried 14,000 bottles of Bordeaux wine straight from Lyon to Wuhan, as part of its ‘New Silk Road’ strategy.
This unquenchable thirst for wine has had a surprising effect in France. Chinese buyers purchased three of the five highest-priced vineyards in Bordeaux last year, according to Christie’s International Realty. They now make up 40pc of all the buyers currently snapping up vineyards in the region, according to Michael Baynes, founder of the agent Maxwell-Storrie-Baynes.
This is still a small part of the overall ownership – just 2pc of the 7,500 chateaux in Bordeaux are Chinese-owned, but “it’s a big story,” says Baynes. Tuscany also saw a big influx of international buyers last year, fuelled by Chinese wine lovers reaping rewards of tax breaks. There have also been a few high profile buyers, such as Jack Ma, the billionaire founder of Alibaba, who now owns three vineyards in Bordeaux.
Chinese buyers purchased three of the five highest-priced vineyards in Bordeaux last year and they now make up 40pc of all the buyers currently snapping up vineyards in the region
The investors started coming in 2009-10, when the Chinese wine market exploded, says Suzanne Mustacich, author of the book ‘Thirsty Dragon: China’s Lust for Bordeaux and the Threat to the World’s Best Wines’. “There were initially a lot of problems and misunderstandings with cultural differences in negotiations,” she says, adding that there weren’t any translators to help dealmakers. Baynes has hired Chinese nationals to cater to the buyers, and also has affiliates in China and Hong Kong to help capture any potential sales there.
“We are inundated with inquiries from Asia,” he says. “We have to weed out the tourists from the investors. In the last three years, the seriousness of the investors has increased.”
These vineyards are being snapped up primarily as a commercial asset, he adds. “We haven’t sold one that has been bought just as a hobby.” Hotel chains and drinks companies are among those buying these Bordeaux vineyards, owning the whole means of production and cutting out the French middleman. “If you are a hotelier and have luxury hotels across China, you can produce wine for four to five euros per bottle, add shipping and pay taxes which brings it to €12, and then sell it for maybe €50. It’s a no-brainer.”
The vast majority of these Chinese-owned vineyards are not in the high-profile appellations such as Pomerol, Pauillac and Margaux, but in areas producing the more generic wines. Here, the buyers are helpfully investing money in chateaux which have languished for years on the market.
"When we are dealing with an Asian buyer, they are often very interested in the more exclusive ones like Margaux or Pauillac, but they recognise the market they are selling to is relatively ignorant of those nuances" Michael Baynes, founder of the agent Maxwell-Storrie-Baynes.
These vineyards are far cheaper – often under €2m, compared to the €100m chateaux in the Medoc with the comparably valuable vines, which come on the market barely once every two years, according to Baynes. “When we are dealing with an Asian buyer, they are often very interested in the more exclusive ones like Margaux or Pauillac, but they recognise the market they are selling to is relatively ignorant of those nuances.”
“Any mature market consumers know what those wines should cost, whereas in China they don’t,” adds Mustacich. “The Chinese investor can sell the wine for more than it’s worth in any other market,” easily making back their investment.
This is down to Bordeaux’s canny long-term work, establishing itself as a luxury brand in China. “They convinced them to drink something they had never seen before,” says Mustacich, comparing its brand to Rolex. Bordeaux’s biggest export market is now China, but the French were surprised that after becoming hooked on the wine, investors came back to buy up real estate.
Other major wine-producing areas of France, such as Burgundy and Champagne, are inward-looking and unwelcoming to foreign buyers. This is especially stark compared to Bordeaux which has welcomed international investors for centuries and many of the biggest brands have foreign names, such as Château Smith Haut Lafitte.
There’s a major bling factor. They can say ‘I own a Bordeaux chateau’ – and if it’s only €2m what does that get you in Hong Kong?
Besides the investment upside, there is the trophy home element. “There’s a major bling factor. They can say ‘I own a Bordeaux chateau’ – and if it’s only €2m what does that get you in Hong Kong?” They also love the history behind these houses, being able to own something dating back to the French Revolution, she adds.
France – and in particular Bordeaux with its brand recognition – is also seen as a safe place to invest, particularly for those negotiating China’s cash economy. “This way, they don’t have to worry about the government taking it away,” says Mustacich.
In 2013, France’s money-laundering investigators Tracfin warned that foreign buyers, such as those from Russia and China, were using French vineyards to hide their money. The party may soon be over, however: last November, China announced it was cracking down on residents moving money out of the country, forcing them to pledge in writing that they will not invest in foreign property.
As a result, Joe Zhou, JLL’s head of research in China, has predicted a big drop in foreign investment this year. The effect of the controls is already showing, with foreign property investment by Chinese companies down by 84pc in January after soaring the previous year.
“We expect this Chinese vineyard investment trend to slow down by 2018,” says David Branch of Christie’s International Real Estate. But it won’t grind to a halt just yet. “There has been a huge evolution between the original buyers from China and the ones now – they have companies and bank accounts outside the country,” says Mustacich. “They already have the money abroad.”
The law is more likely to hit middle-class buyers, perhaps looking for a trophy home. “There’s a group of people that are less multinational, and it’s affecting them,” says Baynes. “A closer look at the law is revealing, as it says if the international investment is strategic for China or for the business, they will let you take your money out.”
He’s optimistic: the average price of a hectare of generic Bordeaux vineyard, the type that Chinese buyers are snapping up, is €16,000, half of where it was 25 years ago. “It’s not a stretch to think we can be back to €50,000 in the next 10 years,” says Baynes. “And it wouldn’t surprise me if Chinese investors were a major factor in that.”
Source: The Telegraph Date: 2017-06-03