Chinese brewer Tsingtao Brewery has made a strategic push into the highly competitive Shanghai market, deliberately cutting into the market share of NZ brewer Lion Nathan.

The brewer, which holds the number three spot in the region, will launch a new beer called Huadong this month, priced at only 1.7 yuan ($0.50 cents).

This would squeeze the market even more, catching Lion Nathan at its weakest point - the brewer recently wrote down its Chinese business by $158m. The New Zealand giant, which produces top brands such as Tooheys and Hahn, has complained about the saturation of the Chinese beer market, with pressure coming from local producers which have low cost structures and offer cheap products.

Suntory supplies 50% of the Shanghai beer market, with Shanghai Mila's Reeb beer second. Mila is a division of Asia Pacific Breweries, a Singapore-based joint venture between Dutch brewer Heineken and Singapore's Fraser & Neave.

Tsingtao plans to brew 30,000 hl of Huadong a year at its plant in the Songjinag district, which it bought from Carlsberg in August. The Danish brewer sold the plant to Tsingtao for $12m after losing the same amount every year for a decade since entering the market in the early 1990s.

Shanghai's beer sales this year are forecast to rise to more than 500,000 hl, compared to 300,000 hl last year.