Australia’s wine industry has greeted China’s decision to remove anti-dumping tariffs on its wine imports with optimism.
After more than three years of strained trade relations, this move opens the door for Australian wine to re-enter what was once its most lucrative export market. However, hopes for a swift and substantial rebound are tempered by a transformed market landscape and challenging economic conditions in China.
For much of the 2000s and early 2010s, China played a pivotal role in the global wine trade, driving demand for imports from countries like Australia, France, Chile, and Italy. At its peak in 2017, China’s wine consumption was booming. Yet by 2023, it had contracted to just a quarter of that peak volume, according to economist Kym Anderson from the University of Adelaide.
Several interwoven factors have contributed to this decline. The country’s prolonged economic downturn, compounded by stringent pandemic-era restrictions, has weakened consumer confidence and discretionary spending. High youth unemployment and a sluggish property market further weigh on sentiment. The result: wine has become less of a priority in consumer budgets, and demand has shifted toward more affordable products.
Competition has also intensified. China’s domestic wine producers are not only improving in quality but also increasing in number, while global producers continue to compete for a foothold. At the same time, Chinese consumers are expanding their palates to include a wider array of alcoholic options—craft beer, cocktails, and other spirits. Wine is no longer the symbol of sophistication it once was. Judy Chan, CEO of Grace Vineyards, even noted that her company has begun diversifying into gin to stay relevant.
Despite these headwinds, there are still segments of opportunity. High-end, globally recognized brands such as Penfolds—produced by Treasury Wine Estates (TWE)—retain strong brand equity in China. These wines appeal to affluent consumers seeking quality and status, a niche that TWE has continued to invest in even during the tariff period.
Australia also benefits from a strategic advantage: its free trade agreement with China gives its wine producers more favorable tariff terms than many competitors. But rebuilding the export pipeline and regaining consumer trust will take time. Meanwhile, the re-entry of Australian wine will put pressure on the market shares of other wine-exporting countries, which had stepped into the gap left by Australia's absence.
While hopes remain that China's wine market could stabilize and recover over time, the days of rapid expansion may be over. Still, with per capita wine consumption in China remaining low and wine accounting for a modest portion of overall alcohol consumption, the long-term growth potential remains—albeit on a more modest trajectory than once envisioned.
Source: Vino-Joy