The huge growth potential and high profit margins in China's wine market have lured more and more capital investment into the industry.

Earlier this month, Macro-Link Holdings Ltd paid 154 million yuan (US$18.6 million) for 40.7 million shares in the well-known wine producer, Tonghua Grape Wine Co Ltd.

After the acquisition, Macro-Link will have a 29 percent controlling stake in the Shanghai-listed company, paving the way for its future development in the wine industry.

Macro-Link engaged in indus- tries diversified as manufacturing, trade, financial investment and real estate development entered the wine market by acquiring the Yunnan Shangrila Winery three years ago.

It has invested 200 million yuan (US$24 million) in building a vineyard in Penglai, in East China's Shandong Province.

Macro-Link's acquisition of Tonghua is just part of the capital investment at present in the domestic wine market.

Hong Kong-listed Tianjin Development Holdings announced this month that it plans to spin off its winery subsidiary Dynasty Winery Ltd and list it on the main board of Hong Kong.

In May, CITIC Guoan Group increased its investment of up to 500 million yuan (US$60 million) in Sun Time International Winery, expanding its shares in the winery to 49 percent.

Sun Time has also invested 30 million yuan (US$36 million) for a new vineyard in Shandong Province.

"Increasing investment in the industry is mainly due to the huge growth potential in China's wine market," said Geng Zhaolin, director of the China Alcoholic Drinks Industry Association.

Statistics show per capita wine consumption in China is only 0.5 litres a year, while the annual world average figure is 7.5 litres.

However, wine consumption in China has grown rapidly in recent years. From 1994 to 2000, global wine output grew by only 6.5 percent, but during the same period China's wine consumption increased 61.8 percent.

Market demand for wine products in the country will continue to grow by an average of 8 to 10 percent a year, a market survey carried out by leading domestic wine producer Changyu shows.

Because of the huge market potential and China's tariff cuts on wine imports, foreign wine makers are also developing a growing interest in the market.

France's largest wine and spirit producer and retailer, Les Grand Chais de France, announced in September it is going to launch its J. P. Chenet range of products, the best selling wine brand around the world, in China.

(China Daily September 28, 2004)