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Can China’s Great Green Wall Create Rich Red Wine?

By Roger Weber

In 2021, the Chinese-Mongolian border saw its worst dust storms in years, bringing dust pollution 20 times healthy levels. Swirling gusts of sand created skies so thick it appeared to be night at high noon. Air conditioners choked. And those who dared step foot outside found their shoes filled with sand and their shirts turned to sandpaper, their eyes irritated and their skin lacerated.

Sandstorms have long been the most under-reported natural disaster common to the world’s most populous country, the most visible manifestation of centuries of encroachment of the ever-expanding Gobi desert into the mainland, driving a wedge between China and Mongolia. More than a nuisance, the expanding desertification has crippled the consistency of the region’s agriculture and challenged survivability along nearly the entirety of China’s northern border.

In 1978, China began an initiative to fight back. The “Three-North Shelter Forest Program”, also known as the “Great Green Wall”, is a 70-year investment across 2,800 miles of its northern territories to try to seed the land with vegetation, increase China’s forested areas, and gradually push back the encroaching desert closer to its historical boundaries, in turn increasing China’s arable land and ending the advance of dust storms across the country.

Despite its massive scale and time horizon, the effort has been conducted with astounding commitment and consistency. A phased process both geographically and methodologically, it is currently in its fourth phase. Over the last 20 years, China has sought to seed large swaths of the land where soil is moist and incentivize planting in areas where it is dry. It seeks a checkerboard pattern of plantings in some areas and gravel in others, cultivating soil as an antidote to dust. In modest measure, it has been effective at reducing the major storms. By 2022, China has planted 130 million new trees.

The massive effort is a testament to the power of China to execute megaprojects, and the power for those projects to literally move the forces of nature in a country where growth has aligned with massive intervention by the government to shepherd China’s economy forward through state action.

Whether it will work as intended over the long-term is yet to be determined. Critics argue that while it is well-intended, the massive influx of new trees will soak up the water table and deplete an already-arid region of the nutrients tenuously holding it together, exacerbating the problems it aims to solve. Proponents counter with claims that it will usher in a newer and richer ecosystem and eliminate the dust storms, while also combatting climate change.

Like so many moves in China, the Great Green Wall is both necessitated by, and made possible by the country’s growth. Massive investment requires massive capital, but state leadership has stuck to its belief that such massive investment is needed to sustain the viability of the country’s northern regions, particularly for its nascent farming.

One wonders whether the state leaders in China who have bet big on the Great Green Wall may have done so around a bowl of grapes or a glass of Merlot. It would be fitting, since one of the farming industries most caught in the crosshairs of the Wall is China’s nascent wine industry, which ironically too has both blossomed because of, and is currently being challenged by China’s decades of rapid growth and urbanization.

Far from a traditional drink in China, the country’s wine industry has blossomed thanks to decades of urbanization that has grown expendable income and driven a premium on luxury goods in the country’s largest cities. In 1996, Chinese premier Li Peng praised health benefits of grape wine, which drove an initial burst of consumerism around the product that the industry there benefits from to this day. While it’s still not huge per capita in the context of China’s population, China is today a top-five wine consumer in the world.

Metrics suggest those numbers could expand dramatically. Among the drivers are the easing of China’s 2013 crackdown on the consumption of luxury goods and the ever-increasing urban population of the country that carries with it both growth in expendable income and a cultural premium on western-inspired products. Imbalances in the market suggest an opportunity for growth, too. Today China’s wine consumption is only a fraction average consumption in France, suggesting demand could realistically rise rapidly in coming years, even if it never reaches western volumes. Further, because demand is inequitably distributed geographically, with Shanghai and Guangdong consuming many multiples the amount of wine consumed in Beijing, many believe demand is still spreading. And today 94 percent of wine consumption in China is red, suggesting enormous potential for diversification. It all points to wine demand that is young and likely to grow in both volume and sophistication.

To date, most of China’s wine consumption has been international wine, particularly from France and Australia. But the potential for expansion has driven speculation that China’s domestic wine market has boundless potential for growth. A 2021 tariff on imported wine from Australia has buoyed those hopes.

The market dynamics have created a perfect storm of demand with a bullseye for the wine industry on the Great Green Wall region. While domestic wine demand has long been comfortably served primarily by vineyards in the eastern Shangdong and Heibei provinces in eastern China, its up-and-coming vineyard regions are all further west deep within the impact zone of the Green Wall.

These regions each today produce “new wines”, leveraging creative irrigation approaches to create colorful varieties of primarily cabernet, merlot, and chardonnay. In Ningxia, vineyards benefit from flooding and nutrient diversity made possible from proximity to the Yellow River. In Shanxi, vineyards seek high-altitude locations where they can soak up the summer rains of the monsoon season in the summer. And in distant Xinjiang, China’s most nascent speculative wine region, conditions are the most perilous, with ancient irrigation techniques harvesting runoff from the region’s extensive mountains as a means of making up for the fact that the region gets only 6 inches of average rain per year, about a fifth of the rain powering vineyards producing similar wines in France and California.

Making up for their natural deficits in rainfall compared to more conventional wine regions, these regions benefit from nuanced soil conditions as a driver of the unique flavors of their wines. In Ningxia, for instance, the clay and limestone gravel soil is rich in minerals and polyphenol, creating a unique sugar-to-acid ratio in the wine, giving it a unique thickness that is critical to driving popularity in a country where thicker alcohols are more traditional to the palate. It’s but one example of the fact that in northwestern China, more than perhaps anywhere else, in a region with relatively low rainfall, the composition of the soil and the depth of the groundwater table has an outsized impact on the flavor and desirability of the wine.

The future of wine in the region would be unpredictable even if it wasn't directly within the influence zone of the Great Green Wall. A young market for wine in a rapidly urbanizing country unfamiliar with the product being introduced to new domestic varieties from arid regions where the taste of the wine is unpredictably contingent on unique attributes driven by soil conditions is already a mouthful of uncertain variables. But that this market is emerging at exactly the same time and place that China is dramatically experimenting with the biggest soil transformation project in world history, with experts wildly disagreeing on its potential results, and China’s speculative wine market is today something like a triple-leveraged stock option. If the majority of these variables converge in a positive direction and create even better soils producing better wines to satisfy a thirstier market, the potential is infinite. But if vegetation seeding inadvertently corrupts the soil quality in any direction, or lowers the water table, or if any variable of the country's market evolution doesn't materialize in the ways anticipated, one of the most promising industries in the world could be corrupted with disastrous consequences to investors.

Megaprojects often have mega-impacts both large and small, and as usual in this era China has gambled big on a gambit with volatile, albeit better than 50/50, prospects for success. The wine industry in western China could make a lot of people very rich, or subpar products could sabotage Chinese tastes for domestic wine permanently, dooming the prospects of an otherwise bright young industry. If you think it could make you rich, gamble away. China has once again proven it has the resourcing to move heaven and earth. But it’s also created the most uncertain of futures for its nectar of the gods.

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