US-China relations are all time low, raising fear that the two countries are heading for a complete decoupling. Meanwhile, good news for wine and spirits in Hainan.

Market Watch 

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It’s a heady week for China and the US, and the relations between the two countries like China watcher Ian Bremmer says are certainly “heading into the toilet”. The US ordered China to close its Consulate in Houston in an unprecedented move, and in retaliation China ordered the US to close its Consulate in Chengdu. “If the relationship between China and the United States continues to deteriorate unchecked,” Cheng Xiaohe, an associate professor at the School of International Studies at Renmin University in Beijing, told New York Times, “the next result will be the severing of diplomatic relations.” The rapidly deteriorating relationship between the world’s two biggest economies will have wide reaching impacts, and wine trade given its small volume compared with others will have, if there’s any consolation, smaller stake to lose if the two head for a complete decoupling. The US currently ranks as China’s 6th biggest bottled wine supplier, with less than 2% market share (1.56%) after rounds of punitive tariffs due to the trade war.

Another news story to watch in the China-US fiasco is Trump administration’s plan to ban entry for all communist party members and their families. This if enacted would affect over 270 million people in China based on NYTimes’ estimate. China has more than 90 million CCP members. In wine trading world, if the ban is adopted, we can say good-bye to wine buyers from China from state-affiliated wine companies such as COFCO Wine & Wine and other top level Chinese executives from the country’s leading wine importers. Some of China’s top wine experts and educators are CCP members. With this level of animosity between the two countries, it looks impossible to grow American wine market in mainland China at this stage. Hong Kong probably seems a better place to invest.

Hong Kong’s special trade status removed. Trump has officially removed Hong Kong’s special trade privileges and said his administration will now treat Hong Kong as another mainland city, which is exactly what mainland China is doing as well. For wine trade, this won’t affect Hong Kong wine importers and merchants as the city has a zero tax policy towards imported wine. For more on this, read our earlier report here.

Duty free in Hainan. Starting from July 1, alcoholic beverage is listed as one of the seven categories of newly added consumer goods exempted from import duties in Hainan, as Beijing aims to turn the tropical island province into the country’s biggest free port. This means consumers can buy duty-free wine and spirits in Hainan. However, purchase per person is only limited to 1500ml, which is the equivalent of two bottles of wines in 750ml format. Aside from expanding the consumer product list, purchase limit entitled to duty free treatment in the province is increased from RMB 30,000 to RMB 100,000 (US$14,250) per year to attract shoppers, according to Chinese media reports.

Upcoming wine events in China

Riesling week in mainland China. Wines of Germany will roll out online and offline promotions across China in the months of July and August to promote German wines. Follow Wines of Germany’s social media accounts to see more details.

ProWine China will kick off soon in November in Shanghai. Th longest-running international wine fair in China, ProWine China this year will serve as a bell weather for what’s to come in the post-coronavirus wine market, as the organizer gears up to meet pent-up demand from the wine trade after a long lull. For more details on the fair, you can click here.

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