With the rapid expansion of China's middle class and the increasing Western cultural influence, the wine consumption in China has experienced a remarkable growth in recent decades. A quantitative study on market power of Chinese wine firms is conducted to assess the competition structure of this industry and to provide economic insights into effective strategies for existing and prospective firms. In this paper, we employ an econometric model to estimate markups using a firm‐level dataset collected from the Chinese wine industry allowing price heterogeneity. The results suggest that there exists an oligopolistic structure in the Chinese wine industry, and geographical region has significant impact on the market power. We also provide discussions on future directions of market structure for domestic as well as multinational firms. [EconLit citations: Q13, L11, L66].