China outlines new approach for partners in its breweries

Preferred investors must offer China improved technology. YOKE HAR LEE reports.


China is signalling to foreign investors in its brewing industry that future investments would be better received if made with a local partner.

The Director-General (minister level) of China's State Administration of Light Industry, Chen Shineng, said joint ventures would be preferred to wholly foreign brewery investments.

But Mr Chen gave an assurance that New Zealand's largest investment in China, Lion Nathan, would remain intact.

Lion Nathan owns a joint-venture brewery in Taihusui, near Wuxi, with the local government as a partner. Lion Nathan also fully owns a brewery in Suzhou in an industrial park promoted jointly by the Chinese and Singapore governments.

Mr Chen led a small Chinese delegation on a visit to New Zealand. He visited a Lion Nathan brewery here.

He also quashed speculation that foreign breweries' production in China might be limited.

Seven breweries had full foreign ownership and accounted for about 30 per cent (6 million tonnes) of China's total beer output, he said.

It had been suggested China might move to limit foreign-owned breweries' output to this level.

China's brewery industry is about to be rationalised as profits remain elusive for foreign brewers hoping for quick gains in the vast Chinese market.

China has more than 700 breweries with an annual capacity of 26 million tonnes.

Mr Chen said actual production was about 19.98 million tonnes.

Of the breweries, 92 were joint ventures and 90 per cent of these had foreigners as the major shareholders and accounted for most of China's output.

Production capacity increased by 300,000 tonnes last year, said Mr Chen.

Analysts are saying the Chinese beer market is undergoing rationalisation.

Already, foreign breweries are finding that unless they can corner the premium end of the beer market and run closer to capacity, investment returns are poor.

Mr Chen said China remained committed to its open policy for foreign investors, but it intended to get better value out of the foreign dollars invested.

New investments in breweries should place emphasis on improving equipment, processes and technology, he said.

"We encourage foreign investors to bring in better technology and will provide preferential treatment. By doing this, we can add value to our industries."

He was confident that China would be a lucrative market for brewers.

The younger generation preferred drinking beer and with improved living standards, the beer-consuming population would grow.