(Yicai Global) Nov. 28 -- The recent strong appreciation of the USD against the yuan is not likely to affect Chinese wine importers too adversely. Although the top 10 countries that supply most of China's imported wine, including Chile, the United States and South Africa, mainly use USD as payment.
The rise in the value of USD has also impacted on wine consumers and retailers, but certain factors help offset it. "The cost of imports rose 20 percent directly, which will be transferred to consumers. From the start of the year to now, the impact of the decline in the exchange rate of the yuan against the dollar has been reflected in the retail price. Fortunately, because consumers pay more and more attention to quality, their sensitivity to price fluctuations is not high," said a dealer named Song who imports wine mainly from South Africa.
China's wine market's vulnerability to currency fluctuations is somewhat limited since the main sources of imports are not necessarily traded in USD, industry insiders told Yicai Global. The overall import volume is still less than the traditional European wine-producing countries, Yicai Global found.
By comparison, in the first half of 2016, bottled wines imported from France accounted for about 40 percent of the country's total import volume.
"The decline in the exchange rate of the yuan against the dollar led to relative increase in overseas procurement costs directly. If the retail price of alcohol does not rise correspondingly, the profit margin will drop," said Zou Zhengfang, co-founder of Bottles XO, an offline-to-offline platform that mainly deals in specialist wine and beer imported from Europe.
Since Europe, Australia and other countries that export wine generally use the euro, or even the yuan, the import costs of wines from such countries have not changed significantly.
Of the countries using USD to settle transactions, some enjoy preferential tariff reduction because of free trade agreements with China, so the overall impact on the cost of imports is also limited, Zou added.