In a dramatic move that will deal a costly blow to China-Australia wine trade, China’s Ministry of Commerce today has announced that it is launching an anti-dumping investigation into Australian wine exports to China, putting Australia’s AU$1.1 billion wine exports on the line.
The announcement came just months after Chinese ambassador to Australia threatened a consumer boycott of Australian goods including wine as relations between the two countries rapidly deteriorate.
The probe will target Australian wine exports to China in containers of less than 2 litres. This will mainly include bottled wines, which is the bulk of the AU$1.1 billion wine trade between China and Australia.
The news sent shock waves among wine trade in both China and Australia. Shares of Australia’s wine giant Treasury Wine Estates, owner of the massively popular wine brand Penfolds, fell 14% this morning.
In a statement sent to Vino Joy News, the company said that it will cooperate with the investigation and will continue to invest in China.
“TWE has had a long and respectful relationship with China over many years through its team, partners, customers and consumers,” the company says.
“As an importer of high-quality, premium Australian wine, including brands such as Penfolds, TWE remains committed to China as a priority market and will continue to invest in its Chinese business and its relationships with customers and consumers.”
The news will further dampen the prospects for the Australian wine giant as earlier last week it announced its net profit suffered a 25% drop in the year ended in June due to coronavirus pandemic.
Torres China, one of the leading wine merchants in China that imports De Bortoli, Vasse Felix and Tyrrell’s, says the probe will most likely affect more on the volume brands, and its full impacts are yet to be seen until the one-year investigation is completed.
Alberto Fernandez, Managing Partner of Torres China, says, “Australian wine will probably suffer a sales decline mainly for its entry-level, and Chilean wine will take over lots of Australian share by volume.
“However we still need to see how Chinese consumers of premium wines will deal with price increases of those mainly from South Australia. Demand might still be flexible if price increases are not very significant.”
Nonetheless, there’s still hope for Australian wine producers before everyone starts panicking, he adds, since tariff on Australian wine currently is zero thanks to the Free Trade Agreement.
“Old World is still paying 14% of duties, while Aussie wines have been paying 0%. The difference in duties should not be very large eventually, and Aussie Shiraz it is still quite unique in its characteristics.”
China is Australia’s biggest export market by value and Australia is China’s biggest source for imported wines. In the past 12 months ended in June, wine exports increased 0.7% in value to AU$1.1 billion and decreased by 17% in volume to 121 million, according to data released by Wine Australia.
Australia accounts for 38% of imported wines in the China market, ahead of France and Chile.
Tensions between the two countries this year flared up over the origin and outbreak of coronavirus. In April, China’s ambassador to Australia Cheng Jingye warned of a consumer boycott of Australian goods including wine.
In May, it was revealed wine is among a list of agricultural goods drawn up by Chinese officials to retaliate Australia.
According to the ministry of commerce, the anti dumping probe was proposed by China Alcoholic Drinks Association, the official drinks body for alcoholic beverage in the country in June and will last for a year.