The 112-year-old Changyu Wine Co is to transfer 30 to 40 percent of its state-owned shares to foreign investors to re-organize its solely state-owned status.

"Changyu will unite with international corporations to create complementary advantages, and together dominate both domestic and foreign markets," said Sun Liqiang, chairman of Changyu Wine Group Company Co Ltd.

Located in Yantai City in East China's Shandong Province, Changyu has become the No.1 brand among China's winemakers. The state owns 53.8 percent of the winery's shares, with its second largest shareholder at 0.68 percent.

"The investment with foreign funds will diversify Changyu's share structure, and I believe the change will greatly energize the century-old brand," Sun said.

Tang Maosong, vice-director of Yantai State-owned Assets Supervision and Administration Bureau, said this is one of eight quality state-owned stocks that Yantai had started transferring to foreign investors since last August.

According to Sun, France's Castel and another global winemaker from the United States had shown the most interest in the purchase.

Experts say Castel is more likely to acquire the final purchase right, for Changyu and Castel have had relations for several years.

Early in 2001, the two sides signed a series of strategic co-operative agreements, including Changyu taking 49 percent of Castel's winery project in Langfang City in Hebei Province and Castel participating 30 percent of Changyu's Yantai chateau project.

French Castel is taking the second place in world wine sales, boasting more than 3,500 red wine brands, the largest wine chateau in Europe, with an annual sales value of 16 billion yuan (US$1.93 billion).

Both Sun and Tang were reluctant to provide more details about the ongoing transfer, but stressed the future deal will have to be successful for both sides after working with a world-famous wine brand, and the foreign shares will be less than 40 percent.

Changyu, the largest winemaker in Asia, produced more than 100,000 tons of wine last year, which is one fifth of domestic wine consumption.

Its assets stood at 2.42 billion yuan (US$293 million) last year.

In 2002, Changyu was ranked as one of the top 16 Chinese famous brands.

Changyu intends to be one of the top 20 wine makers in the world within the coming five years, Sun said.

"Inviting foreign investment is part of our international development strategy, and will be an important approach towards reaching our goals," Sun continued, "If Changyu can increase annual sales by 15 percent over the next years, by 2008 our yearly sales value will surpass 4 billion yuan (US$484 million), which is coming up to that of the world's tenth winemaker last year."

Statistics show the average growth rate has grown by only 1 percent worldwide, but 10 percent in China. Obviously, China, or Asia, is becoming a potential market for the wine industry.

This is an important reason that world winery giants are interested in Changyu.

In fact, Changyu has already launched various projects with several foreign winemakers. Its wine has been selling well among Southeastern Asian countries since the 1950s.

In 2002 the company set up its first overseas plant in Thailand.

In 1997, Changyu's shareholding company is listed in Hong Kong Stock Exchange, then in 2002 it issued A shares in Shanghai.

To date, it has raised more than 890 million yuan (US$107.6 million), becoming the only enterprise of winemaking industry in China to simultaneously hold both H and A shares.

(China Daily April 1, 2004)