China and wine – a growing love affair

China is now the world’s fastest growing wine market.

China has emerged on to the global wine scene with unprecedented speed in recent years, both in terms of production and consumption. Currently, it is one of the top wine-producing countries in the world. The country has produced 11.374 mln hls of wine in 2016; up 2.04%. The national wine consumption has more than doubled in the past two decades, and only 10% of this is satisfied by imported wines. The Chinese wine import has reportedly even decreased 7.8% during the first 2 months of 2017, compared to the same period of 2016.

China’s indigenous vine species have been cultivated and used to make wine for more than 1500 years, but it was not until the end of the 19th century that wine production gained any form of scale and formality, with the help of European missionaries, in particular in Shandong province. The Changyu winery was established in Yantai (Shandong) soon after this in 1892, and retains a significant position in Chinese wine today.

changyu

At the turn of the new millennium there were an estimated 450,000 ha under vine in China, including classic varieties such as Cabernet Sauvignon, Cabernet Franc and Merlot that were introduced by foreign investors along with Western winemaking techniques. Today, many international wine companies have interests in China, including Moet Hennessy, Remy Cointreau, Pernod Ricard, Torres and the Bordeaux families of Lurton and Barons de Rothschild (of Cheval Blanc and Lafite Rothschild respectively).

China’s wine industry has experienced unprecedented growth in the past decade, and millions of dollars have been invested in establishing a wine tourism industry. However, this growth has not been without controversy: wine counterfeiting has been a major issue and the quality of Chinese wine is thus far patchy, ranging from excellent to undrinkable.

In this blog, I will introduce China’s main wine regions.

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Hebei

Hebei province, the capital city of Beijing and port city of Tianjin are de facto one region. The province spans 6 degrees of latitude between 36°N and 42°N and is home to a wide range of landscapes, from the floodplains of the Yellow River in the south to the Yan Mountains in the north. A wine industry surrounding the Cabernet Sauvignon grape variety has sprung up in Hebei and there are also some smaller plantings of Chardonnay, Merlot and Marselan.

Despite the proximity of the Bohai Sea, the climate in Hebei is more continental than maritime. Hot, humid summers are followed by cold, dry winters that are subject to freezing winds from Siberia. Hebei is affected by the East Asian Monsoon, a weather system that brings cool, moist air from the Pacific and Indian oceans and causes rain when this collides with warmer air over the continent. Most rainfall occurs during the summer, and growers in certain parts of the province must be wary of the dangers of fungal vine diseases in the late summer and early fall.

Huailai sits in the shadow of the Great Wall of China in the hills surrounding Beijing and is home to several large Chinese producers. Among these is Greatwall, one of the country’s most famous wine producers. As in many parts of China, there is significant interest from French producers, and the Sino-French Demonstration Vineyard was planted in the late 1990s as a joint venture between the French and Chinese governments. Huailai’s terroir has proved well suited to viticulture, with the close proximity to Beijing’s large population providing an excellent added incentive for the development of a wine industry here. Vineyards at altitudes up to 1000 m above sea level have a much cooler climate than Beijing, and high levels of sunshine ensure that grapes receive ample sunshine for ripening.

Changli is situated on the coast just south of Qinhuangdao. Cabernet Sauvignon vines are planted in the agriculturally suitable land surrounding the city, and several large producers are located here.

Tianjin is a municipality on the east coast of China, close to Beijing. Some viticulture takes place along the Jiyan River in the east of the region. A small amount of wine is made here from Cabernet Sauvignon, Muscat Hamburg and Chardonnay. Although the terroir in Tianjin is not ideal for grape-growing, the region’s main viticultural advantage is its proximity to Beijing. Dynasty Wines, one of China’s largest wine companies and a joint venture with the French company Remy Cointreau, is based in Tianjin and makes wines from grapes grown within the municipality as well as from those grown in more-famous regions such as Ningxia.

dynasty

Ningxia

Ningxia is a rapidly emerging wine-producing region in the central-north of China. The wide, heavily irrigated valley between the Yellow River and the base of Helan Mountain has proved to be one of China’s most promising vineyard areas. A range of wines are made here from grape varieties such as Cabernet Sauvignon, Cabernet Gernischt and Chardonnay and they vary in quality from insipid to excellent.

While Ningxia covers 66,000 sq km, most viticulture takes place in a 160 km river valley in the very north of the region. Here, the Yellow River provides sufficient water for irrigation and the arid landscape has been transformed into arable land well suited to the production of wine.

Ningxia has a thoroughly continental climate, its eastern border lying some 950 km from the nearest ocean. The summers are hot, although the high altitude of the vineyards (some more than 1200 m above sea level) helps to create a suitable climate for wine-growing. At this altitude, intense sunlight during the day is followed by much cooler nights. This diurnal temperature shift – which is exacerbated by the lack of moisture in the air – helps to slow ripening in the grapes, leading to a balance of phenols and acidity.

The short growing season in Ningxia is followed by a long, cold winter, and vines must be protected from freezing temperatures with an insulating mound of dirt piled around the base of the plant. While this is an expensive and time-consuming task, the abundance of labour in China means that it is much easier than in other parts of the world, adding a human element into the overall terroir of Ningxia.

The land at the base of Helan Mountain is part of the Yellow River floodplain, and the soils have been deposited over time by both the river and from material washed down from the mountains. These pebbly, sandy soils are free draining and have low fertility, which lessens both vigour and yield in the vine, leading to smaller, more-concentrated berries.

Helan Mountain, is particularly well regarded and in 2003 became China’s first official appellation, recognized by the Chinese General Administration of Quality Supervision, Inspection and Quarantine. A 2009 Helan Qing Xue Jia Bei Lan Cabernet blend made in Helan Mountain won a major trophy at the Decanter World Wine Awards in 2010. The terroir of Ningxia has not escaped international attention, and companies such as Pernod Ricard and Moet Hennessy have interests in the region, along with some of China’s largest producers. Some commentators have been quick to point out that the slower-ripening Cabernet Sauvignon grape variety is perhaps not suited to the shorter growing season here. But Chardonnay and Riesling perform well, and some vignerons have expressed interest in experimenting with Syrah and the production of sparkling wine.

Shandong

Shandong is one of China’s oldest wine-producing regions. Cabernet Gernischt, Riesling and Chardonnay are the most important grape varieties grown in the province. The most viticulturally important part of the province is the 274 km Shandong Peninsula (also known as the Jiaodong Peninsula) that juts into the Yellow Sea toward Korea. The Yantai International Wine Exposition is an important annual event on the Chinese wine calendar and attracts interest and exhibitors from around the world.

The terroir of Shandong avoids the harsh continental extremes of the centre of China and instead has a maritime climate, with cooler summers and warmer winters. Shandong is affected by the East Asian Monsoon, a weather system that brings cool, moist air from the Pacific Ocean to the shores of the province, causing summer rain. Fungal vine diseases caused by high rainfall are an important consideration for vignerons in the late summer and early autumn. Most of Shandong is relatively flat, coastal terrain, although the middle of the province is marked by some hillier country; the highest peak reaches 1500 m above sea level. Many of the vineyards spread throughout the province sit on south-facing slopes where better drainage helps to lessen the impact of summer rain, ensuring the vines do not get ‘wet feet’ and become waterlogged.

Shanxi

Shanxi covers a mountainous loess plateau between the western desert and the coastal plain, Shanxi is becoming increasingly well-known for its wines. These are made predominantly from Cabernet Sauvignon, Muscat, Chardonnay and Merlot. The province of Hebei is on the eastern border, and the Yellow River makes up the western edge of the province. China’s capital city, Beijing, is about 400 km from the Shanxi capital of Taiyuan, where much of the province’s viticulture takes place. Grace Vineyards is Shanxi’s best-known grower, and is one of China’s most highly regarded producers in terms of quality. Its Shanxi vineyards are located on the deep sandy loam soils outside of Taiyuan, where excellent drainage allows the vines to grow deep root systems, encouraging the health of the vine.

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Shanxi has a continental climate, but is still affected by the East Asian Monsoon, which brings cool, moist air from the Pacific and Indian Oceans to the warmer land, causing rain. Most of the annual rainfall occurs in summer, and high levels of humidity can promote fungal vine diseases such as mildew. However, this rain is inconsistent from vintage to vintage, and Shanxi’s high altitude and high levels of sunshine mean that in years when there is less rain, high diurnal temperature variation results in grapes with a balance of phenolic ripeness and acidity, leading to good quality wines. Winters in Shanxi are cold and dry, due to far-reaching weather systems from Siberia. As temperatures drop below freezing, growers must bury the vines to insulate them from the devastating cold over the winter. While this is an expensive and time-consuming process, an abundance of labour means that it is possible in this part of China.

Xinjiang

Xinjiang is mostly associated with light, uncomplicated wines made from Cabernet Sauvignon, Chardonnay and Merlot. Xinjiang covers 1.6 million sq km. Much of this area is either desert or mountain, and Xinjiang is cut neatly in two by the Tianshan mountain range. It is along the southern edge of these mountains that most viticulture takes place, particularly surrounding the cities of Turpan and Bayingol.

Xinjiang’s climate is truly continental: the region contains the point on land that is furthest from any ocean. It is officially classed as a semi-arid desert climate on the Koppen climate scale, and is characterized by hot summers and very cold winters. Ample sunshine during the growing season ensures the grapes can reach full ripeness, and the low annual rainfall means that there is little pressure from fungal vine diseases. The vines are subject to winter freezes, and as such are buried during the winter for insulation. On the northern side of the mountains, where the climate is cooler and slightly more precipitous, several growers are enjoying considerable success with the production of ice wine, mostly made from the hybrid Vidal grape variety.

Wine has been made in this part of China for around 3000 years. Greek settlers brought vines and farming methods around 300 BC, and 13th Century explorer Marco Polo described Xinjiang grape wines in his writings. Although Xinjiang is currently better known for bulk wine production, the viticultural sector here is seeking to improve its winemaking techniques and select better cultivars in order to markedly increase both the quantity and quality of the wines. As a result, the region is beginning to attract attention from international investors, winemakers and consumers. Loulan wine has won an award at a Hong Kong wine tasting event.

Yunnan

Yunnan is a province in the south of China. The tropical, mountainous terrain in this part of the country is supporting an increasing amount of viticulture, mostly based around the mysterious hybrid varieties Rose Honey, French Wild and Crystal.

A chain of mountains runs through the western part of Yunnan’s 394,000 sq km, giving rise to a landscape that is not well suited to commercial, large-scale agriculture. However, the warm climate is moderated by the Indian and Pacific Oceans, and the growing season here is correspondingly long and favourable. A selection of crops, including rice, tea, coffee, wheat and tobacco, is produced on the few areas of arable land available in Yunnan. Viticulture has become an important part of the agricultural economy here, particularly in the past few decades. Yunnan lies between latitudes 21°N to 29°N, which is similar to the Sahara Desert in Africa. The temperatures usually associated with low latitudes are moderated by the high altitudes here, and vineyards at elevations as high as 1800 m above sea level are saved from the ill-effects of the heat by significantly cooler nights. The diurnal temperature variation during the growing season helps to extend the ripening period, allowing grapes to develop flavour along with acidity. Mineral resources are abundant in Yunnan, and as a result, soils throughout the province are rich in minerals.

Since the 1980s, Yunnan producers have focused more carefully on wine quality, and as in many other parts of China, international producers are starting to take notice. Moet Hennessy has opened a winery in Deqin County in the north of Yunnan (the supposed location of ‘Shangri-la’), and Bordeaux winemaker Pierre Lurton (of Cheval Blanc and Chateau d’Yquem) has also expressed interest in the province. More than 150 years ago, Jesuit missionaries from France introduced a honey rose strain of Cabernet grapes to the Deqin area, where they have been cultivated on a small scale ever since.

Chinese buyers own 2% of Bordeaux chateaus

Chinese are also heavily investing in foreign wineries, in particular in the Bordeaux region. More than 150 or 2% of vineyard chateaus in Bordeaux are now owned by Chinese, China Business News reported citing industry estimates. Seeking beyond import business, the chateau investors aim to lock fine wine from production phase for their booming home market. Bordeaux has seen explosive surge of Chinese investors over the past decade, while it took Belgian buyers about 70 years in comparison to acquire over 100 chateaus in the region, Li Lijuan, director of Christie’s international real estate market in China, told the newspaper. Chinese buyers spend on average EUR 5 to 10 mln on a chateau whose vineyard could take up 10 to 30 hectares, according to an industry works Le Vin, le Rouge, la Chine. Recent corporate investors include subsidiaries of local wine company Changyu and food conglomerate Bright Food Group and COFCO. Investment return could be as high as 10 percent for those who have marketing and sales channels in China, Li said, adding that Chinese buyers also see chateaus as a resort for family or good real estate investment given long return period. “About 20 years ago, Chinese economy was boosted by foreign capital including those from France, while nowadays Bordeax could use help from China to retain its world-class standard,” Somalina Nguon-Guignet, managing director of French property specialist IFL, was quoted in the book as saying. “France ought to feel pleased by interests it receives from foreign investors.”

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.

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China’s Food Capital – Yantai

It’s getting time to highlight another important food region of China in this blog. This time I am introducing Yantai in Shandong.

Shandong province is often referred to as China’s fruit and vegetable garden and Yantai, a coastal city in Shandong, is committed to building a brand for itself as “China’s food city”. Geographically, Yantai is situated close to the Liaodong peninsula of Liaoning province, another important food production region, with a quick ferry service with Dalian, a major industrial and port city on that peninsula.

YantaiLoc

According to Zhang Yongxia, mayor of Yantai, “We are working to boost the city’s food sector by promoting food diversity and security, aiming to develop the city into a heavyweight in both China and the overseas food market”.

The food sector has always been one of Yantai’s competitive industries. The China Food Industry Association recognised Yantai as a well-known Chinese food city in 2009.

Statistics from the local government show that in 2014 revenue generated from the city’s food industry hit RMB 181 billion, an increase of 8.7% from the previous year.

There are more than 500 major enterprises doing business in the city’s food industry. These include Changyu Pioneer Wine Co, cooking oil producer Shandong Luhua Co, Shandong Longda Meat Foodstuff Co, and Shandong Oriental Ocean Sci-tech Co. All the companies play leading roles in their sectors.

Yantai has a competitive edge in 16 food sectors including fruit and vegetables, oil, meat, aquatic products, rice noodles (fensi), cake, candy, instant foods, dairy products and condiments.

The city has 27 nationally famous trademarks and 96 leading provincial trademarks in the food sector. Three brands – Changyu, Luhua and Longda – were named among China’s top 500 most valuable brands in 2014.

Food products made in Yantai are exported to more than 80 countries and regions including Russia, the United States and South Korea. According to the city’s plans, revenue generated from the food industry will reach RMB 300 billion by the end of 2017.

Yantai’s industrial sector generated more revenue and profits in the first half of 2017 than that of any other city in Shandong province, according to data from Yantai’s municipal commission of economy and information technology. The city’s total industrial revenues reached RMB 931 billion in the first half of 2017, leading to total profits of RMB 66 billion, the statistics state.

Home of fruits

With its favorable climate conditions and geographical location, Yantai has become one of China’s most important fruit planting, processing and exporting bases”.

The city is known as China’s hometown of fruit. Fruits produced in Yantai, such as apples, cherries, pears and grapes, are known far and wide.

Yantai apples, which were given geographic indication status by the State Quality Supervision and Inspection and Quarantine Administration in 2002, have become one of the things the city is renowned for. An important centre for apple growing is Qixia, a town Southeast of Yantai.

With a cultivating history of more than 140 years, Yantai has 181,333 hectares of apple orchards, with an annual output of 4.23 mln mt, according to statistics from the Yantai Agriculture Bureau.

The city has more than 200 varieties of apples. The brand Yantai Apple has a value of RMB 10.59 billion, the leading amount in China’s fruit industry for seven consecutive years.

With a bright color and sweet taste, Yantai apples are exported to more than 60 countries and regions with an annual export volume of 600,000 mt, accounting for one-fourth of the country’s total apple exports.

Twenty-one tons of Yantai apples were shipped from Yantai to the United States again on Nov 9, 2015. It was the first time for Yantai apples to enter the US market. As a country with strict inspection and quarantine measures, the US had previously forbidden apple imports from China for 17 years.

“As the price in the US is twice the price in Asian countries, expanding to the US market will surely promote the apple industry in Yantai and increase locals’ income,” said Bai Guoqiang, head of Yantai Agriculture Bureau.

Cherries are another well-known fruit from Yantai, where cherry trees have grown for 130 years. More than 25,000 hectares of cherry trees produce about 190,000 mt of the fruit a year. The cherries are exported to more than 60 countries and regions, including South Korea, Germany and the US.

Fruit juice

With such a variety of fruits, it is not a surprise that Yantai and the surrounding regions are a centre of fruit juice production in China. One of the country’s leading producers of apple juice concentrate, Andre, is located in Mouping, just East of Yantai.

AndreLogo

North Andre Juice Co. Ltd. was established in 1996. The company’s products include: juice concentrate, pureed and preserved fruit, fruit essences, and pectin. Since its establishment, the company has invested more than 3 billion RMB and set up 9 modern juice concentrate production bases in Shandong, Shaanxi, Jiangsu, Liaoning and Shanxi. Andre operates a total of 14 juice concentrate processing lines, 2 pectin production lines, 1 puree processing line and 1 dried fruit production line. The designed annual fruit processing products is more than 2 mln mt, and the annual juice concentrate production 340,000 mt, the annual pectin production 4000 mt and the annual puree production 10000 mt. In April 2003, Andre Juice Company went public on the Hong Kong Stock Exchange, becoming the first listed company in juice concentrate industry in China.

China’s Bordeaux

At almost the same latitude as Bordeaux in France, Yantai is also considered one of the world’s top seven coastal grape-growing areas. It was named the only “international grape and wine city” in Asia by the International Office of Vine and Wine in 1987.

The city now has more than 18,000 hectares of vineyards, 11,000 hectares of which provide grapes for winemaking. It is home to more than 20 international wine businesses and a large number of domestic vintners, including the brands Changyu, Great Wall (owned by the COFCO Group) and Dynasty. Chateau Lafite Rothschild selected Penglai, a county-level city of Yantai, to develop its first vineyard and chateau in China. Penglai established a sister relationship with Australia’s Barossa, one of the world’s finest wine producing regions, on March 25.

Changyu Wine Co. is China’s oldest and largest winery. The company was founded in 1892 by Zhang Bishi. The company’s name is formed from his surname Zhang (Chang) and the Chinese character meaning prosperity. In 2002, the company entered into cooperation with Castel group in France to establish the first professional chateau in China. In 2006, the company cooperated with a Canadian company to build the largest ice wine chateau in the world near Huanlong Lake of Liaoning province. It has also expanded overseas, building Chateau Changyu Kely in New Zealand. Changyu Pioneer Wine Company is now among the ten largest wine companies in the world, producing more than 900,000 hls of wine p.a.

Changyu is constructing a Wine City, with help from the Italian wine company Illva Saronno Holding Spa. It will include a European style chateau and a Wine Research Institute. The facility has been referred to as a Disney World for Wine in a Bloomberg report.

International food expo

To further boost its food industry, Yantai holds a series of international food trade fairs and trade fairs every year.

Fruit & Vegetable Food Fair

YantaiExpo

During the 16th Fruit, Vegetable and Food Fair held in the city last month, thousands of participants from more than 10 countries and regions including Japan, South Korea and Italy came to Yantai in search of business opportunities.

The four-day event attracted organizations and companies from home and abroad to display fruits, vegetables, seedlings, food processing equipment and agricultural machinery at nearly 900 booths.

Six overseas organizations and delegations including the Japan Consul General in Qingdao participated in the fair and brought their latest developments in fruit and vegetable production and related equipment manufacturing.

Some high-tech products at the expo were particularly interesting, including irrigation equipment from Israel, Italy’s agriculture testing machines, apple-planting technology from Japan and unmanned plant protection helicopters from Shandong.

Held in Yantai every year since 1999, the event has become one of China’s most influential expos in the fruit, vegetable and food industry. It provides a sound exchange and cooperation platform for Chinese and foreign companies in the sector.

The fair’s organizers said that the event has attracted more than 1.7 million delegates from across the world during the past 15 years. This year’s event alone attracted 58,000 visitors and the trade volume hit RMB 230 million.

East Asia International Food Trade Fair

The 12th East Asia International Food Trade Fair was held in Yantai June 2 – 5, 2017. resulted in the signing of cooperation agreements worth RMB 1.60 billion. With the theme of “Green, Innovation, Cooperation and Development” attracted more than 900 enterprises from home and abroad. They brought more than 13,000 food products covering 16 categories, from imported food to time-honored Chinese products. The fair was also regarded as lucrative by enterprises from other Chinese regions. More than 100 food enterprises from Sichuan brought their products to the fair, including local liquors, pigs, tea, pickles, condiments and snacks. Exhibitors from Jilin also made appearances as a group, presenting, among other products, ginseng, forest frog’s oviducts and pilose antler, known as the “three treasures in Northeast China”. Enterprises in Harbin offered Qing’an rice, time-honoured Harbin sausages and other specialties. Co-organised to the food fair, Yantai also hosted a trade fair for Jiangxi specialties and an expo of imported maternal and child products.

Scottish Chambers of Commerce opens trade office in Yantai

The Scottish Chambers of Commerce opened an international trade office in Yantai, a Chinese port city in Shandong province May 16, 2017. The formal opening ceremony was hosted by Zhang Bo, vice-mayor of the city, together with senior officials from Yantai municipal government. The Scottish delegation was led by SCC’s new president, Tim Allan, and chief executive Liz Cameron. The Scottish Chambers of Commerce identified robotics, bioscience, manufacturing, engineering and smart technologies, agriculture, food and drink and soccer management as being areas of key interest.

Dutch university opens branch in Yantai

The University of Groningen, The Netherlands, in collaboration with China Agricultural University, plans to establish a presence on a campus in the city of Yantai. In Yantai the university plans to offer Bachelor’s, Master’s and PhD programmes that incorporate significant research activities and collaboration with the business sector. TheYantai campus is located in the middle of a high-tech zone covering 38 km². It is the home of many high-end industries, companies and research institutes, providing good opportunities for top sector jobs and cooperation in the area of research. In addition, as one of China’s greenest cities. Yantai is situated in the province of Shandong, whose 97 million inhabitants offer great potential in attracting future students. Shandong province is also an important economic area in China.

Bioscience Innovation Demonstration Zone

Yantai will see rapid development in its medical and health industry as authorities are mulling over building an international bioscience innovation demonstration zone. Based on the rapid development of its medical industry, the zone will consist of seven industrial parks including biomedicine industrial park, traditional Chinese medicine and precision healthcare industrial park, which will be built during the 13th Five Year Plan (2016-20) period, according to Li Wei, head of Yantai Food and Drug Administration.

By the end of 2020, the projected prime operating revenues of Yantai’s medical and health industry will exceed RMB 100 bln, achieving year-on-year growth of 15%. Yantai is home to many key national laboratories and boasts high innovation capabilities and potential.

Yantai will introduce supportive policies to encourage research and development, and attract and nurture leading enterprises and high-caliber talents in sectors such as medicine and medical equipment. Yantai has set up a special fund of RMB 200 mln to build platforms providing technological support. To boost the profile and competitiveness of Yantai’s medical industry, Yantai will host the first international conference on medical innovation and development from Sept 16 to 17, 2017.

Yantai specialties served at BRICS Summit

Three Yantai-based food brands made their way onto the dining tables of the 9th BRICS Summit, which was held in Xiamen, Fujian province on Sept 3-5, 2017. Leaders from Brazil, Russia, India, China and South Africa were served up apples, condiments and Longkou fensi (a kind of vermicelli made from bean starch) from Yantai during the summit. Fruit supplier Yantai Lianlei Foods was given the green light to provide its apples for the summit in April. Lianlei apples first went on sale in Xiamen six years ago, and they have become hugely popular in the coastal city, their sales volume rising from just a few tons to more than 1000 mt. The company’s apples are also exported to Japan and several countries in Europe and America. Longkou fensi (see above) produced by Shuangta Foods was also selected as a designated food for the Xiamen summit by the China Food and Drug Administration. Shinho Group also hit the headlines after becoming the official supplier of eight condiments including bean paste, soy sauce, vinegar and pepper to the summit.

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.