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The evolution of foreign wine demand in China

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  • Andrew Muhammad
  • Amanda M. Leister
  • Lihong McPhail
  • Wei Chen

Abstract

type="main" xml:id="ajar12029-abs-0001"> We estimate source-differentiated wine demand in China using the absolute price version of the Rotterdam demand system. Within the last decade, China has gone from obscurity to an important participant in global wine trade. The continual growth of Chinese wine imports suggests that a one-time structural shift approach may not fully capture how consumption patterns or demand preferences have changed over time. Thus, a rolling or moving regression procedure is used to account for continual adjustments in import demand patterns and to evaluate overall parameter instability. Our results confirm that Chinese consumers hold French wine in high regard and that French wine demand has consistently increased over the last decade, more than any other exporting source. Consumers in China have gone from allocating about 1/3 to over 1/2 of every dollar to French wine and the expenditure elasticity for French wine mostly increased while the market was expanding. Although Australian wine has a very solid standing in the Chinese market, results suggest that its market share will likely remain unchanged. Marginal budget share and expenditure elasticity estimates indicate that Australia will continue to account for about 20 per cent of the foreign wine market in China.

Suggested Citation

  • Andrew Muhammad & Amanda M. Leister & Lihong McPhail & Wei Chen, 2014. "The evolution of foreign wine demand in China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(3), pages 392-408, July.
    • Handle: RePEc:bla:ajarec:v:58:y:2014:i:3:p:392-408
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    File URL: http://hdl.handle.net/10.1111/ajar.2014.58.issue-3
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    Cited by:

    1. Ye Yang & Angela Paladino, 2015. "The case of wine: understanding Chinese gift-giving behavior," Marketing Letters, Springer, vol. 26(3), pages 335-361, September.
    2. Andrew Muhammad & Amanda M. Countryman, 2019. "In Vino ‘No’ Veritas: impacts of fraud on wine imports in China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(4), pages 742-758, October.
    3. Ping Qing & Aiqin Xi & Wuyang Hu, 2015. "Self-Consumption, Gifting, and Chinese Wine Consumers," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 63(4), pages 601-620, December.
    4. Davis, Christopher G. & Cessna, Jerry, 2020. "Prospects for Growth in U.S. Dairy Exports to Southeast Asia," Agricultural Economic Reports 307713, United States Department of Agriculture, Economic Research Service.
    5. Davis, Christopher G & Cessna, Jerry, 2020. "Prospects for Growth in U.S. Dairy Exports to Southeast Asia," Economic Research Report 327204, United States Department of Agriculture, Economic Research Service.
    6. Kym Anderson & Vicente Pinilla, 2022. "Wine's belated globalization, 1845–2025," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(2), pages 742-765, June.
    7. Dimson, Elroy & Rousseau, Peter L. & Spaenjers, Christophe, 2015. "The price of wine," Journal of Financial Economics, Elsevier, vol. 118(2), pages 431-449.
    8. Qing, Ping & Hu, Wuyang, 2016. "Chinese Consumer Preference for Red Wine Attributes," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235477, Agricultural and Applied Economics Association.

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