In a desert region of northwestern China, Liu Li spoke proudly of how the once barren sands have been transformed in recent years into rolling vineyards, helping the region become one of the heartlands of the country's domestic wine industry.

"We have turned a yellow sand area into a golden one," said Liu, workshop director and assistant brewer at Lilan Winery in Ningxia, referring to the success of the local wines. "Good grapes and wine are produced, winning many awards at home and abroad."

But although wine production there is being promoted by the government with prominent backing from President Xi Jinping, the home market has become more challenging due to social and economic changes while the increasing recognition that Ningxia wines have won in international competitions has yet to result in robust exports.

File photo shows Liu Li, workshop director and assistant brewer at Lilan Winery in the Ningxia autonomous region in China, speaking about Chinese wine at a vineyard on Aug. 6, 2024. (Kyodo)

Wine drinking in China grew steadily for decades, making it the fifth-largest market before the COVID-19 pandemic started. However, China's wine consumption has been in continual decline in recent years, pushing it down to ninth place in 2023, according to the International Organization of Vine and Wine known as OIV.

Industry watchers attribute weaker demand partly to Xi's anti-corruption campaign that has reduced wine-drinking opportunities among senior government officials, repercussions from the pandemic, and subsequent slower economic growth due to a prolonged property-sector crisis.

Another factor is a trend of younger people turning away from alcohol.

The Chinese government is nevertheless continuing to promote wine production in Ningxia with subsidies and other preferential treatment for winemakers, in part as an effort to help curb desertification and reduce poverty in the area by providing employment opportunities for some 130,000 people a year in the region, which has a large Muslim minority.

One of three major wine-producing areas in China, along with Shandong Province on the east coast and the far-western Xinjiang region, Ningxia vineyards are located at a latitude that puts them in the "golden belt of wine production," also covering Napa Valley in California.

File photo taken on Aug. 6, 2024, shows a vineyard at Greatwall Chateau Terroir winery at the foot of the Helan mountain range in China's northwestern Ningxia autonomous region. (Kyodo)

The some 130 wineries in the eastern foothills of the Helan mountain range on the outskirts of the autonomous region's capital Yinchuan account for about half of domestic output.

Rich soil minerals, a dry climate with annual rainfall of about 200 millimeters, sunshine of more than 3,000 hours per year and a large temperature difference between day and night make the region optimal for wine production. Irrigation is provided from the nearby Yellow River.

Xi has repeatedly visited Ningxia, most recently in 2020, to encourage the development of the local wine industry and raise its brand profile under the slogan of "Chinese Wine -- A Marvel to the World."

Many of the region's wines are premium offerings that have won international awards including at the Decanter World Wine Awards, Concours Mondial de Bruxelles and Berliner Wine Trophy.

High-quality Ningxia wines have also been gifted by Xi to French President Emmanuel Macron as well as participants of events at the U.N. headquarters in New York.

File photo shows a poster advertising Chinese wine gifted to French President Emmanuel Macron at the China (Ningxia) International Wine Culture and Tourism Expo in the country's northwestern Ningxia autonomous region on Aug. 9, 2024. (Kyodo)

Nevertheless, Chinese-produced wines have yet to establish an export foothold.

In 2022, more than 75 percent of exports in terms of value went to Hong Kong and Macao and the second-biggest market, the United States, received only 5.1 percent of exports, which in all accounted for less than 2 percent of the country's overall wine output.

Along with the challenge of adapting to a changing drinking culture in the domestic market, Chinese winemakers, who supplied more than a third of the market in 2022, face the revival of imports from Australia, now free of massive tariffs imposed after a bilateral spat over the origin of the coronavirus.

Ma Jie, head of the state-owned Helan Hong Winery in Ningxia, said that his company is aware of the tough market dynamics and has started offering more affordable wines -- reds and whites priced at 168 yuan ($24) a bottle.

File photo taken in China's northwestern Ningxia autonomous region on Aug. 9, 2024, shows participants drinking Ningxia wine and eating dishes representing the major types of Chinese cuisine at an event where they examined the best pairings of gourmet food and local wine. (Kyodo)

The winery has also been exploring new nonalcoholic products to meet the demand of the younger generations who tend to shun strong alcoholic beverages, he added.

"We are exploring new wine products including alcohol-free, sparkling wine and so on," he said. "Because young consumers will have new ideas, we have to cater to this trend."

Since 2021, Yinchuan has hosted an annual international wine culture and tourism expo to promote the local brand, with representatives from such entities as OIV and the Global Wine Tourism Organization attending the latest round held in August.

At the wine expo, Ma's winery marketed a white wine blended with jasmine tea priced at 98 yuan a bottle as part of efforts to attract younger customers.

File photo shows Ningxia white wine blended with jasmine tea marketed at the China (Ningxia) International Wine Culture and Tourism Expo  on Aug. 9, 2024. (Kyodo)

This year's wine fair hosted an event showcasing chefs specializing in the eight major types of Chinese cuisine to examine the best matches with Ningxia wines. It was touted by Qu Hao, chief of the event organizing body, as heralding "a new breakthrough" in the fusion of Chinese culinary and Western wine cultures.

A number of Ningxia wineries also promote wine tourism. Chateau Hedong, which used to be a coal mining site, has converted locomotive trains into accommodation, offering stays for some 400 yuan per night including two free bottles of wine.

According to official data, the wineries in the region attract about 1.35 million tourists annually. But a couple from Xian, capital of the neighboring province of Shaanxi, who stayed in August at a Ningxia winery on a hill with their young daughters and extended family members were not completely sold on China's wine industry.

"We came here to escape the summer heat," the wife said, adding she prefers drinking beer to wine, while her husband is a teetotaler.