It’s a rare occurrence, admittedly, but there are times when Lord Sugar, the original East End barrow boy made good, talks a lot of sense. The latest series of The Apprentice was a bit of a yawn – Sugar invested £250,000 of his fortune in a dull recruitment agency created by ex-wrestler, Ricky Martin – but I reckon the business magnate’s antennae are acute when it comes to the wine business.

Lord Sugar chose Hatton over runner up, Tom Gearing, whose wine investment business, Cult Wines Ltd, was deemed too much of a risk. Gearing’s ambitious plan to raise £25m made the have-a-go entrepreneur surprisingly twitchy. “Don’t get me wrong,” he said, “I’ve made lots and lots of mistakes, but this could be a calamity with my name associated with it.”

His main criticism was that the Far East market is too volatile. “At the moment, the market is rampant,” he continued in his inimitable patois. “But all it needs is one day for some analyst to stand up and say the Chinese are sick of wine now and bang, bosh goes your Château Mon Tromp, or whatever it is. It goes flying down from £200 a bottle to £50 and then you’re lumbered with it.”

Lord Sugar’s assessment of China may be incorrect in a number of respects – of which more in a moment – but his caution is surely justified. And not just where the Far East is concerned. The Liv-Ex Fine Wine 100, which tracks the price movement of the most sought after wines on the secondary market, was down 4% in May, reflecting a trend that started in July 2011.

You could argue, of course, that now is a good time to buy fine wine, but this is only true if the market has hit the bottom of the curve. It is entirely possible that things are going to get even worse before they get better. Much hangs on the world economy, dependent as it is on factors including the American deficit, the state of the euro, Spanish banks, the French president and Greek voters.

Even if you take a more optimistic view, investing in wine still requires a good deal of expertise. Things are a good deal more complicated today than they were between January 2009 (the low point of the Fine Wine 100) and July last year, when prices showed impressive monthly gains.

Then it was possible to argue that wine was a better investment than bonds, shares, property or the underside of the nearest mattress. Now, for all the optimism and bravura of people like Tom Gearing, that is surely open to question. There are a handful of wines – Bordeaux châteaux like Lynch-Bages and Pontet-Canet, for instance – that remain underpriced, even in years like 2009 and 2010, but for now the investment market is flat at best.

This brings us back to China. There is no doubt that one part of that market – Hong Kong – is booming, with an estimated 500 wine merchants plying their trade in the bustling city state. Farr Vintners currently do half of their business by value through Hong Kong and, even in a difficult en primeur campaign like 2011, Berry Brothers sold 20% of their Bordeaux there.

But there is a world of difference between Hong Kong (no tax) and mainland China (45% tax “plus a brown envelope”, according to one source). Most of the fine wine that is drunk in China is imported illegally, much of it through Shenzen. It is common practice, apparently, to pay mules to carry two bottles across the border for HK$100 a trip to avoid duty.

This is understandable, if not necessarily forgivable, given the levels of corruption in China and the difficulty of finding good importers. It is not unknown for customs’ officials to take two bottles out of a case, for “chemical analysis”, never to be seen again.

All of the above has prompted at least one fine wine merchant to question the viability of the Chinese market in its current guise. “China as a market does not exist until you can get wine in there professionally and legally,” says Simon Staples, Asian sales and marketing director for Berry Brothers.

Contrary to what Tom Gearing and Lord Sugar seem to believe, outside Hong Kong “Asia hasn’t happened as a market yet,” according to Staples. “It might take two weeks, or it might take five years.” There are rumours that Chinese duty may be halved to 20% soon, but for now they are only that.

The same is true of India, another potentially large market affected by high taxes. The European Union is currently negotiating to reduce the 150% import as part of a Free Trade Agreement, but this is unlikely to happen before next year. The Union des Grands Crus de Bordeaux’s recent tastings in Delhi and Mumbai earlier this month were in investment in the future as much as the present.

Undeterred by losing in the final of The Apprentice, Tom Gearing is planning to expand Cult Wines Ltd, following interest from potential investors. I wish him and them well, but in the current climate, I reckon Lord Sugar made the right call.

Originally published in Off Licence News