China’s Invasion Continues

China’s Invasion Continues

Editor Aaron Gentzler

China has invaded the French wine market. Most folks would be happy about the wealth that's changing hands... but not the French.

France's biggest problem these days is not its role in a continent-wide fiscal meltdown. At least, that's the case if you ask a handful of winos. They're fretting about a Chinese invasion.

And, damn it, they want some state intervention.

It all started late last summer. A Chinese gambling tycoon swooped in and bought the chateau that produced Napoleon's favorite red wine. It was one of Bordeaux's top prizes... but now it's in the hands of Chinese investors.

"I think France is selling its soul and that our politicians must react," said Jean-Michel Guillon, a local winemaker. "We are starting to say to ourselves that our heritage is going out the window because it is not the only [foreign] purchase we've seen in the area. I'm afraid that within years, Burgundy will no longer belong to the Burgundians."

He's right. The Chinese are storming the region.

Over the past four years, some 30 French chateaux were bought by Chinese investors, and another 20 deals are currently in the works.

Thanks to growth of over 100% from China's burgeoning middle class last year, the country is now the top importer of wine from France's Bordeaux region. It bought more than 58 million bottles of the red wine in 2011.

China's fresh love of wine has sent prices soaring. Over the weekend, Burgundy held its famous wine auction... with none other than Carla Bruni-Sarkozy at the gavel. The average bottle of wine sold for 380 euros.

That's 54% more than last year.

Prices are up... but the French aren't happy. They don't like the surge in demand from Asia. The Chinese are distorting “their” market.

“After having made the market price of certain Bordeaux explode in an irrational manner, they're now logically interested in Burgundy and its niche wines,” said Laurent Gotti, an expert on Burgundy's wines. “They want everything that is the most expensive and are prepared to fork out incredible sums.”

It's proof that even the over-cultured French are xenophobic.

“They never say hello or goodbye,” said one resident of the wine region. “All that matters is the price. If it's 60 euros, they're not interested. If it's 250 euros, they take six. They don't give a stuff about the wine itself.”

Most businessmen would relish such a quick spike in prices. Bubbles like these spawn millionaires.

But to so many of the French, wine isn't a business. It's a culture. It's a way of life – their way of life. They don't understand the Chinese are simply trying to make a buck.

Wine is a great place to make some money. And the Chinese know it. Collectible bottles have appreciated by an average of 16% each year over the past decade. But that figure – as the French auction last week showed – is rising fast.

It makes sense the Chinese are flocking to the market.

The country's "conventional" markets are -- dare I say it -- even more manipulated than what we're forced to endure here at home. Their currency is rigged. The econo-data is bogus. Taxes are high and unpredictable. And years of stimulus have masked the true health of the economy.

It is no wonder investors are doing whatever they can to ditch traditional assets. The Chinese are simply trying to get their money out of a rigged economy any way they can.

Using that same logic, we understand why so many American investors are ditching their Wall Street investments. What ails us is not all that different from what ails China. Between now and the end of the year, as Congress works to raise our taxes and hide its addiction to spending, we're going to get an up-close view of what it looks like to flat-out manipulate an economy.

Bottom line... there are phenomenal moneymaking opportunities available to ordinary investors with the guts to stray from the herd. The wine market's incredible surge over the past 24 months is proof conventional markets are dead.

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