From Prestige to Liquidation: The Destiny of Chinese-Owned Châteaux in France

Chinese-owned French vineyards are being sold at significantly reduced rates due to Beijing's crackdown on lavish governmental expenditure, which has created challenges for these wineries.

Chateau Latour-Laguens is a Chinese-owned vineyard that has re-entered the market at a much reduced price. Image: Getty Images/Patrick Aventurier.

Château Latour-Laguens was the multimillion-euro flagship of a daring new epoch in Chinese-owned viticulture just a few years prior. The winery, situated 30 miles southwest of Bordeaux, is currently in a state of disrepair, unoccupied, and is being offered for a fraction of its initial valuation.

As China diminishes its affinity for imported wine, numerous Chinese-owned vineyards are being sold at significantly reduced prices. For numerous investors located in Beijing and Shanghai, the potential for substantial profit has deteriorated. A multitude of factors is propelling the sell-off. Stricter capital controls hinder Chinese citizens' ability to spend abroad, while an internal anti-corruption campaign has diminished the demand for expensive gifts.

Nine châteaux in Bordeaux, valued at around EUR 35.5 million, were confiscated by France in May from a Chinese entrepreneur convicted of embezzling state funds and money laundering.

It has recently been revealed that a significant number of patrons simply despise the wine. The Chinese dinner table is incompatible with robust, tannin-laden red wines.

At that time, China was among the most fascinating and swiftly growing wine markets globally. Renowned bottles of French Bordeaux have emerged as the latest status symbol among China's affluent elite, who present them as opulent gifts and exhibit them in their residences akin to trophies, coinciding with the surging desire for French luxury brands such as Dior, Hermès, and Louis Vuitton.

While foreign ownership has historically been prevalent in Bordeaux’s wine-growing region, the surge of Chinese investors was remarkable; within a few years, they procured almost 200 vineyards to meet the anticipated insatiable demand for French wine in their homeland.

After a decade, numerous properties are available for purchase at a fraction of their original price.

In 2008, the Chinese real estate firm Longhai Investment Group acquired Château Latour-Laguens, garnering attention as one of the inaugural vineyards purchased in the Entre-Deux-Mers wine region. Le Figaro said that the Chinese purchasers acquired the entire lot for EUR 2 million, although the initial transaction price was not officially disclosed. The property is now available for EUR 150,000, following the removal of the vines.

This deviated from the intended course of action.

Chateau Latour-Laguens was among the initial wine properties in the Bordeaux region acquired by a Chinese corporation. Image: AFP/Philippe Lopez.

China's wine consumption surged by 142% from 2007 to 2011. China and Hong Kong emerged as the foremost global consumers of red wine, favoring French Bordeaux. By the conclusion of 2013, they had exceeded France and Italy. Chinese investors, keen to capitalize on a new economic opportunity, acquired vineyards and rebranded them as Gold Rabbit or Imperial Rabbit.

Locals were astonished to find bottles of red wine, usually priced at EUR 3 or EUR 4 in France, being sold for EUR 20 to EUR 30. The wines were designated for consumers in China, including exorbitant profit margins.

Nevertheless, the euphoria was premature. In 2012, wine consumption in China attained its zenith. In 2013, China's president, Xi Jinping, initiated an austerity program that promptly curtailed lavish public expenditures, just after numerous Chinese millionaires executed ownership certificates. The action followed a succession of corruption episodes, often entailing extravagant gifts or bribery, such as a luxury handbag or an expensive bottle of red wine.

In 2017, Chinese investors had a further setback as Beijing instituted new capital controls that limited the outflow of assets from China. Ms. Li Lijuan, a Chinese real estate representative for Vineyards-Bordeaux, remarked, “It was disastrous for business.” She received four to five daily inquiries from wealthy Chinese businessmen seeking to engage in the Bordeaux wine surge.

Ten years after the influx of Chinese investors into the grape sector, the situation has deteriorated. Image: Alamy

“I maintain a dossier, and since commencing my employment in 2013, I have identified approximately 300 prospective Chinese buyers interested in acquiring a domain,” stated Ms. Li.

The International Organization of Vine and Wine reports that China's wine consumption has consistently decreased since 2012, averaging an annual reduction of 2 million hectoliters since 2018. In 2023, the country's wine consumption decreased by 25% compared to the prior year, attributed to a declining economy.

Jérôme Baudouin, the chief editor of the wine journal La Revue du Vin, had long foreseen this trend. He observes that wine is unable to rival the conventional Chinese supper, which often comprises a combination of savory and sweet dishes, including fish, pork, and vegetables, all presented simultaneously at the center of the table.

He asserts that bottles are collected for exhibition rather than use, potentially explaining the considerable discrepancy between wine sales and actual consumption in China. “To me, it was an illusion.” He stated, "Both sides were erroneous." Producers in Bordeaux believed a new market was emerging for them, akin to the US and UK, and that this would be enduring. The situation was analogous for the Chinese who arrived in Bordeaux. They believed that producing wine and generating substantial profits would be effortless.

Laborers on the estates and in the vineyards found themselves in a precarious position, with numerous grievances regarding unpaid salaries, discordant work cultures, and negligent proprietors. In 2020, Hélène Pauly and her five colleagues at Château de Pic were unpaid by their Chinese employers for around five months. Ms. Pauly, the estate's administrative manager, needed to withdraw funds from her savings and request overdraft protection. Her colleagues were necessitated to utilize food banks and secure bank loans. The Bordeaux tribunal ultimately ruled in favor of the workers and mandated back pay following her confrontation with her employer, Xu Min.

“Their explanations were consistently devoid of sincerity and honesty,” Ms. Pauly said The Telegraph. She described her experience in a challenging environment characterized by micromanagement from China and unreasonable demands from supervisors lacking knowledge of vineyard operations, such as scheduling the harvest in June instead of September.

During her most vulnerable moments, Ms. Pauly began to apprehend for her protection. “I was unaware of the extent of their capabilities…” They were aware of my address and my routines, and could have effortlessly taken action to convey a message to me. She retired prematurely due to the exhausting experience. “Certain Chinese proprietors abruptly disappear.” Corinne Lantheaume, a union spokesperson for the local CFDT Gironde who supported Ms. Pauly’s case, stated that the primary difficulty is managing absentee owners in China.

“Certain Chinese proprietors vanish entirely,” she stated. “Our challenge lies in the fact that when an issue arises in France, we are uncertain whom to contact, as all operations are based in China.” Upon our success, the new owner purchasing the property will remit the outstanding salary on their behalf.

Ms. Lantheaume asserts that Chinese corporations often harbor mistrust towards French staff. Instead, they enlist Chinese laborers with minimal to no experience in the wine sector or vineyards.

“There exists a significant distrust of French employees.” It becomes intricate when one lacks trust in individuals who possess expertise in the task.

Ms. Lantheaume promptly observes that Peter Kwok, a Hong Kong entrepreneur and proprietor of Maison Vignobles K, is esteemed by both his staff and fellow vintners, making him one of the most commendable employers in the region. Furthermore, labor disputes in châteaux owned by French nationals are well-known.

Château Loudenne is among several Bordeaux estates that have been reacquired by French investors. Source: Bordeaux Tourism.

Ms. Li contends that mistrust can be reciprocal, regardless of its justification. She recounts witnessing a Chinese employer evade the problem of frozen assets by compensating his employees in cash. Regrettably, the lack of documentation allowed the duo to wrongfully accuse their employer of non-payment in court.

Ms. Li reports that affluent Chinese nationals living abroad in Malaysia, Singapore, and Thailand have shown interest in recent developments about Chinese investors seeking to divest their chateaux.

“Currently, I receive approximately four to five inquiries weekly.”