China props up beer industry in face of foreign imports

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BEIJING -- The Chinese government is to give certain domestic breweries the same preferential treatment awarded to Sino-foreign joint ventures in an attempt to prop up the national beer industry.

Fu Limin, vice president of the China Council of Light Industry, says the State will grant special conditions to 10 breweries with annual production of more than 100,000 tons, which include lower rates on income tax and tax exemption for certain periods. By 2000, these breweries, producing total of 8 million tons annually, should dominate the domestic market.

In 1995, China produced 15.46 million tons of beer, becoming the world's second largest beer producer and consumer. But the growth of joint ventures in the Chinese brewing industry has given rise to worries about the future prospects of domestic breweries.

Many Chinese brands have ceased production in the past few years, as foreign brands have found their way into the market. Foreign funds used by Chinese breweries have almost reached the $500m mark. And around 50% of breweries with an annual production capacity above 50,000 tons have become joint ventures, according to estimates from the China Wine-Making Association.

By the end of 1995, there were more than 60 joint ventures out of the total 640 breweries, with foreign companies holding the majority of shares in two-thirds of the joint ventures.

Overseas investors are clearly convinced that the Chinese beer market has great potential. A London-based international organization predicts that by the end of 2000, the world's total beer consumption will hit 150 billion litres, compared to 121.3 billion litres in 1994. Asian countries will contribute two-thirds of the increase and China alone will account for half of the increase in consumption in Asia.

Copyright August 1996 Crain Communications Inc.

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