A Moet Hennessy spokesman said production would start in three years. 'This will be the first production of sparkling wine in China made according to traditional European methods,' he said.

Dynasty Wines is already producing sparkling wine on the mainland.

'We are attracted to the China wine market. We are studying further possibilities in the market,' the Moet Hennessy spokesman said.

Moet Hennessy, which is 66 per cent owned by French luxury group LVMH, owns Moet & Chandon, the world's largest champagne company. The mainland is already Moet Hennessy's biggest cognac market and the French company's champagne and cognac sales there grew in double digits last year.

The joint venture will attract more international and mainland wine companies to invest in Ningxia, said Nongken's website. In the Helanshan district where the joint venture vineyard is located, Nongken already has 670 hectares of vineyards with an annual wine processing capacity of 30,000 tonnes, and aims to expand its vineyards to 2,010 hectares.

Nongken, established in 1950, has 9.3 billion yuan (HK$11.1 billion) of gross assets, an annual production value of more than 1.1 billion yuan, more than 100 million yuan of annual tax payments, and more than 187,000 hectares of agricultural land, according to its website.

Rex Yeung, financial controller at Hong Kong-listed mainland wine producer Dynasty Wines, said the joint venture was good for the mainland wine market.

'It will enhance the winemaking skill level in China. There will be more companies to educate the public to appreciate sparkling wine and develop the sparkling wine market in China,' he said.

'If the market becomes bigger, Dynasty can be the distributor of foreign brands of champagne and sparkling wine in China, so the profits of the company will increase in the long run.'

Yeung estimated the current mainland market for wine and champagne to be 700,000 tonnes, which will grow between 13 and 18 per cent during the next five years.

The mainland's wine market almost tripled from 346 million litres in 2003 to 1.05 billion litres in 2009, according to a report by consultancy Redfern Associates. However, the mainland's per capita wine consumption in 2009 was 0.8 litres, far below France's level of 56 litres. In 2009, mainland producers accounted for 83 per cent of the mainland's wine consumption.

We'll drink to that

The mainland is already Moet Hennessy's biggest cognac market

The mainland's wine market almost tripled from 2003 to 2009, going from 346 million litres to this many litres: 1.05b