Penglai, a city on the northern coast of Shandong Peninsula, is one of the most famous "fairylands" of ancient Chinese literature. Today, it has earned another title, "Chinese Napa Valley", for its top grape winery.

Boasting high-quality winemaking grape, almost all top wine manufacturers in China and some from abroad have wineries in Penglai, said Liu Shuqi, secretary of the Penglai Committee of the Communist Party of China.

With 66 wine companies, the city has realized an annual output of 80,000 tons of wine, accounting for one fifth of the nation's total.

So far, 37,000 local farmers, or one-third of the total number of farmers in Penglai, are engaged in grape planting business, earning an annual net income of 4,000 yuan (US$497) per mu (0.06 hectares) and an increased revenue of 300 million yuan (US$37 million) last year.

The winery industry has also employed 120,000 local residents, which takes up 40 per cent of the city's total labour force. By 2007, grape plantation area will expand to 10,000 hectares with the involvement of 70,000 local farmers.

The vigorous wine and wineries business has benefited the city's economy in many ways.

Thanks to the grape growing and winery businesses, per capita net income of the city's residents reached 5,810 yuan (US$691) last year, up 10.8 per cent year-on-year.

The city's advantage in growing grapes is a natural gift due to its special climate and geographical conditions.

Located at the 37th parallel of north latitude, Penglai has the excellent climatic conditions to grow grape and brew top-quality wine.

"We have plenty of sunshine, sand soil and the sea, all elements to make the best wine," said Liu, proudly.

He cited the city's more than 500-year history of grape plantation as an example to showcase its experienced know-how in grape planting and brewing.

With rapid urban development since the 1990s, wine has been gaining popularity among Chinese consumers.

However, domestic industry, with an overall annual output of only 400,000 tons, has not kept up with the fast-growing demand.

Eyeing this great potential, Penglai is expected to strengthen its grape planting and winemaking capacity as well as promote a tourism industry based on its beautiful vineyards.

Building Penglai's image as a famous grape and wine industry base tops the local government's agenda,

To raise the overall quality of the local grape growing and brewing industry, the government has also made heavy investment in research and development.

"We've injected 2 million yuan (US$248,756) into inviting top Chinese experts in this field to draft development plans for our future," the mayor said.

The government has established the Penglai Grapevine & Wine Bureau and related industrial associations to regulate the local industry and market.

Also, the China Penglai International Wine Week, held in August every year, has become an effective platform to promote the industry to the world.