China to probe EU brandy in tit-for-tat antidumping move
• Investigation is linked to a broader row involving biodiesel exports, says France’s cognac industry association
China has opened an antidumping investigation on brandy imported from the EU, a step that appears to be mainly targeted at France and adds to enduring trade disputes between Beijing and Brussels.
The investigation announced by China’s commerce ministry on Friday will focus on brandy in containers of less than 200l from the EU. The news knocked shares in French spirits companies Remy Cointreau and Pernod Ricard lower.
It was prompted by a complaint submitted by the China Alcoholic Beverages Association on behalf of the domestic brandy industry, the ministry said.
China imported $1.57bn worth of spirits from distilled grape wine in 2023 (until November) and France accounts for 99.8% of all EU brandy exports, according to Chinese customs data.
Trade disputes between China and Europe have been mounting over the past year, with both sides exchanging accusations of unfair competition and protectionism. Most recently, the EU said in December it would begin an antidumping investigation into biodiesel imports from China.
France’s cognac industry association said it will fully cooperate with Chinese authorities but it believes the probe is linked to a broader trade row rather than the liquor market.
“We are confident that our products and commercial practices fully comply with Chinese and international regulations,” the Bureau National Interprofessionnel du Cognac (BNIC) said.
Remy Cointreau declined to comment. Pernod Ricard, LVMH and the European Commission did not immediately respond to requests for comment.
“China moves are a shot across the bow to let Europe know that it too can play hardball against rising protectionism in Europe,” said Shaun Rein, founder and MD of Shanghaibased China Market Research. He said Beijing’s move against European brands is a “counterstrike” to the EU’s subsidy probe in September into China’s electric vehicle imports.
is what Pernod Ricard derives for its group sales from the market in China
is cognac’s share of Perno Ricard sales in China
CAMPARI
The move comes as concerns grow about slowing demand for luxury goods in China, the world’s number two economy, as a property crisis derails hopes of a post-Covid spending spree.
Pernod Ricard derives 10% of its group sales from China and cognac accounts for more than 50% of Pernod Ricard sales in China.
In December, Italy’s Campari bought French cognac brand Courvoisier, in a move aimed at expanding its footprint in China, which represents about 9% of revenues. Campari did not immediately respond to a request for a comment.
At their December summit, EU leaders said Europe would not tolerate “unfair competition” from China, and Beijing told the EU it expected Brussels to exercise prudence when introducing “restrictive” trade policies.
In September, China blasted an EU antisubsidy probe backed by Paris into Chinese-made electric vehicles, which was launched in September, as “protectionist”.
China has opened trade probes during past spells of political tensions. In 2020, during a diplomatic dispute with Australia, China levied antidumping and antisubsidy tariffs on Australian wine and other imports.
Beijing has since lifted trade limits on most Australian exports as relations improved and in November said it would review the need for the curbs on Australian wine.
Max Zenglein, chief economist at the Berlin-based Mercator Institute for China Studies, a leading European think-tank, said Beijing now appears to be following a similar script with Brussels.
“This is a first, very targeted response, and aims to serve as a warning towards the EU to tread carefully,” he said.
“It is still far from the escalation between China and Australia, but China is following a well-established pattern on applying economic pressure while limiting the damage to its own economy.”