Huge Returns Pull Chinese Speculators Out Of Real Estate And Into French Wine

Wine Stain

A week ago we highlighted how Chinese demand for French wines was surging, and this was inflating the prices of many vintages. One wine’s price rose 25% in just a month. It is an example of how Chinese growth and financial liquidity were spilling over into international markets.

Yet apparently Chinese demand isn’t just the result of growing Chinese consumption. Wine’s high ‘investment’ returns lately have turned it into a speculative market of its own, one that is pulling people out of the real estate market and into French wine:

China Daily:

“The wine market is new in China and has the most potential,” said Jiang Yu, a private vineyard owner who used to be a professional real estate investor. He followed his nose and the money into the more profitable wine industry after the Chinese government tightened property policies this year.

Jin Cunxing from Wenzhou, in East China’s Zhejiang province, who is also a former property investor, traveled to Bordeaux six months ago to buy hundreds of bottles of Chateau Lafite Rothschild.

He said: “I don’t know where all these Chinese buyers have come from. The peak season isn’t here yet but the price of vintage wines has increased 30 per cent this year.”

The number of Chinese wine dealers is growing rapidly since China doesn’t have a single regulated dealer.

This one expects 20 – 30% annual returns:

Xu is a wine collector for investment as well as pleasure. When he swirls wine in a goblet, you could say he is actually managing his assets.

“We have invested in some 60 different fine wine brands around the world worth a total of HK$100 million ($13 million),” said Xu.

“I believe the average annual rate of return will range from 20 per cent to 30 per cent.”

China Daily describes the current wine investment boom as ‘hot money speculation’, and it seems like high returns are responsible rather than an appreciation for French wine. So what other odd markets could Chinese speculation spillover into? All it takes is A) high recent returns, B) a Chinese demand story, and C) a market Chinese are able to access.

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