Experts say Chinese entrepreneurs should be cautious with their investments in French vineyards. Provided to China Daily

Experts urge Chinese buyers to be wary of business risks before buying property in overseas markets

With the number of investors pouring millions of dollars into French vineyards rising sharply in recent years, experts are urging prospective Chinese entrepreneurs to be wary of the business risks before they go ahead with their investments.

The Bordeaux region in France, renowned for its wine, vineyards and chateaux, has been the major beneficiary of Chinese investment, with several high-ticket purchases recently raising eyebrows.

Demand for wine in China, the fifth-largest wine market, has been growing steadily, prompting some experts to predict that it will displace the United States as the largest wine market by 2016. Last year, Chinese investors bought about 50 vineyards in the Bordeaux region alone, and the number is likely to increase this year.

However, experts say many investors are buying vineyards overseas also for emigration purposes.

Luo Jingwen, a property developer from Hangzhou, Zhejiang province, admits he is planning to buy a small vineyard in Bordeaux so he can emigrate.

"Property investments in France are a good choice for those who want to live abroad, as housing prices have remained relatively stable and unaffected by the economic crisis," Luo says.

"Apart from that, a vineyard in Bordeaux is better than residential or commercial property, as it enables me to have a running business and start life afresh."

Immigration policies in many European countries like France, Portugal and Spain have been drafted in such a manner that those investing money, including in properties valued over a certain amount, can obtain permanent residency later.

"I decided to spend $700,000 (515,000 euros) on a small family vineyard, including all the employees, in Bordeaux. What I found is that most of the vineyards are run by professionals and as such I don't have to worry much about it," Luo says.

However, there are several hidden risks when investors buy vineyards and not being aware of them could lead to severe economic losses, experts say.

"Many Chinese buyers are buying property abroad so they can immigrate, and also have a running business. Without proper knowledge of the industry and the risks, it would be difficult to sustain the business, and this in turn could jeopardize the immigration process," says Sun Changgang, an immigration lawyer with the Beijing-based W&H Law Firm.

Most Chinese buyers are wine importers keen on improving the quality of wine products so do not have much practical experience in running vineyards, Sun says.

"More Chinese people are choosing to buy wines imported from abroad with their rich and fruity taste, which requires us to select products from a variety of vineyards," says Yao Zhenhua, chairman of Changshu Aifeila Vineyard Co Ltd, which imports wines from the Aifeila Vineyard in France.

Yao, the only shareholder of the company, spent nearly 1.5 million yuan in 2006 on buying an 8 percent stake in the family vineyard south of Bordeaux. That agreement had envisaged annual returns higher than 20 percent and sole China retailer status for Yao's company.

"I've been working with the vineyard for more than 10 years and can safely say that the quality of wines is quite exceptional and the quantity limited," Yao says.