Vintage Wines Fetch Record Prices in Hong Kong

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Victor Fraile / Reuters

A man examines a glass of red wine from Spain during a Vinexpo Asia-Pacific tasting session in Hong Kong on May 28, 2008

Hong Kong may be better known for its char siu bao than its chardonnay, but the wealthy city is making a surprising bid to become one of the world's most important markets for fine wines. Last weekend marked another milestone: In the second of its two major wine auctions held this year in Hong Kong, Sotheby's on Oct. 3 and 4 sold $7.9 million worth of vintage wines, taking the house's total wines sales in Hong Kong to $14.3 million in 2009 — eclipsing its sales totals of $10.5 million in New York and $8 million in London. Although New York is expected to remain overall the largest market for vintage vino for now, Hong Kong is gaining fast; the city's nouveau oenophiles are expected to splash out a total of some $60 million this year in wine auctions, twice as much as London's stuffy old guard.

There's an obvious explanation why Hong Kong is suddenly terroir cognito in the wine world. The global recession has gutted the portfolios of wealthy Western investors who are cutting back on their lavish purchases, including spending on vintage wine. Not so for Chinese investors. China's economy has suffered less and bounced back faster from the financial crisis than the economies of the U.S and U.K. At the Sotheby's auction, a six-Liter bottle of 1982 Chateau Petrus Imperial — described as having a sweet leather taste and a pruney finish — was gaveled off to a mainland Chinese bidder for a record $93,000. "The balance of power in the wine world is now shifting from West to East," explains Gregory De'eb, co-founder of a Hong Kong wine storage facility called Crown Wine Cellars.

In fact, Hong Kong, a former British colony that has long been a major Asian trading and financial hub, has for several years aspired to become Asia's premier wine hub. Hong Kong collectors already own 17% of the world's stock of fine wines. But most of that stash — the largest in the world on a per capita basis — has been stored abroad because the city charged an onerous duty on imported wines that at one point reached as high as 80%. Then, two years ago, the market really began to flourish when the government scrapped all wine and spirits duties. To encourage the creation of a local wine industry, authorities also abolished most of the paperwork surrounding wine imports, and importers were allowed to have customs inspections inside wine cellars, saving delicate vintages from examination in the scorching dockside sun.

The measures, implemented in February, 2008, had a marked effect: the value of wine imported into the city in 2008 surged by more than 80%. As wine shops, tasting seminars and cellars proliferated, more Hong Kong residents began taking an interest in drinking wine, not just investing in it. Said noted wine critic Jancis Robinson, editor of The Oxford Companion to Wine: "I have never before, in my 30-plus years in wine, witnessed a government so consciously targeting the fine-wine market."

There's a major commercial prize at stake. Hong Kong would like to become a wine center for Asia. With half the world's population, Asia accounts for only 7% of total wine consumption, so the market has plenty of room to grow. With zero tariffs and world-class logistics, Hong Kong hopes to become the main entrepot for Asia's wine trade and headquarters for the region's wine experts and merchants.

The biggest prize of all is China, which is already the largest wine importer in Asia. But at the moment, Hong Kong, which is a part of China but has its own system of government, is not in a strong position to become sommelier to its big brother. Authorities in Beijing subject wine imports, including those from Hong Kong, to a 48% tax, and allow Chinese customs officials to seize three bottles from every shipment for "testing" — a major barrier to importing high-priced wines where bottles can be worth thousands of dollars. A Hong Kong industry group is trying to convince Bejing to allow wine imported to Hong Kong to pass into China duty free and without going through Chinese customs.

Still, Hong Kong is determined to achieve recognition as Asia's wine hub. On Nov. 4-6, the city is hosting its second international wine and spirits fair. The fair is part of a broad effort to promote wine growth throughout the region, and even includes a tasting competition to determine what wines best complement traditional Asian dishes. Vintners and wine buffs, take note: with Asia rising, the flavors that please regional palettes could some day drive the decisions wineries make when growing, aging and blending their products. The West needs to face a sobering reality: Hong Kong is a new center of the world's wine trade, and it's here to stay.