Wine sales to mainland China are double those of Britain in value and 65 per cent larger than the US.
Australian wine exports to China could be 35 per cent or $180 million larger than industry figures show, due to grey market traders diverting sales from third countries into the mainland.
Just-released data from the China Customs Bureau shows Australian wine imports were $702 million in 2016, compared to the $520 million figure published by industry body Wine Australia.
The discrepancy is due to Australian wine coming into China via other jurisdictions like Hong Kong, but also from third countries in Europe and South East Asia.
"That's the nature of the wine business, there is always a grey market," said one China-based wine merchant who asked not to be named.
"There is a whole industry built around parallel trading like this."
The new data out of China does not change the overall level of Australian exports, which Wine Australia put at $2.2 billion in 2016, but gives a different perspective on where these exports are consumed.
It suggests local producers are more reliant than ever on the mainland market, which could account for nearly a third of wine exports, compared to 23pc according to Wine Australia.
The China data also shows sales to the mainland are double those of Britain in value and 65 per cent larger than the US.
And it's not just a case of Australian wine being re-exported from Hong Kong.
Even if all of last year's exports to Hong Kong, worth $110m, were diverted to the mainland it would still not make up for the gap between the Wine Australia data and that from China customs.
The China-based wine merchant said much of the "grey market" wine came in from Hong Kong and across the region, but the falling British pound could have also seen some Australian wine diverted from the UK last year.
"Australian wine is certainly flavour of the month up here at the moment," he said.
This was apparent in the performance of Treasury Wine Estates (TWE) which said on Tuesday its half-year profit in Asia rose 76pc to $79 million. That is up from just $5 million three years ago.
TWE has led the revival of Australian wine in China, which suffered badly from Beijing's anti-corruption campaign in 2013.
The China customs data shows Australian wine is a firm second behind France in terms of value, with imports having more than doubled since 2014 to $US543m ($702m).
The market share of Australian wine over the same period has increased from 18.1pc to 24.7 pc.
Australia has stolen share from Spanish, Italian and US producers, while the French have remained stable.
China's overall imported wine market grew by nearly 17pc last year to $US2.2b.
- This article first appeared in The Australian Financial Review
The story Wine exports to China bigger than thought first appeared on Farm Online.
