LVMH has bought a vineyard in the mountainous province of Yunnan, betting on China's growing taste for wine and signaling its intent to become a major player in the country's rapidly expanding drinks industry.

Moet Hennessey, the French company's wine and spirits division, said it had agreed to a joint venture with China's VATS Group to set up the winery in the area known as Shangri-La in the Southwest of the country, to produce premium quality red wine.

The 30-hectare, high-altitude vineyard is located in an "extremely promising growing area" chosen after a "painstaking search," and should begin producing wine within four to five years, LVMH said.

The move comes one year after the company bought a high-end sparkling wine producer in Ningxia.

"Thanks to the creation of this winery joint venture we will be able to offer Chinese consumers a premium quality red wine within four to five years," Christophe Navarre, the chief executive of Moet Hennessy, said today. "The partnership with VATS is a new step in our long-term commitment in China."

The French luxury goods giant gained its first foothold in the lucrative Chinese drinks industry five years ago with the acquisition of Wenjun, a white spirits maker based in Sichuan province.

Some 3.87 million liters of wine were bought in China last year, compared with 2.16 million liters in 2006, according to the market research company Euromonitor.