China launches tit-for-tat anti-dumping probe into EU brandy

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 a European Union anti-subsidy probe backed by Paris into Chinese-made electric vehicles, that was launched in September, as "protectionist".

China has begun an anti-dumping investigation on brandy imported from the European Union, it said on Friday, a step that looks to be mainly targeted at France and is likely to increase tensions with the bloc. The investigation announced by China's commerce ministry will focus on brandy in containers of less than 200 litres (43.99 UK gallons) from the European Union.

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 $1.57 billion worth of spirits from distilled grape wine in 2023 through November and France accounts for 99.8% of all EU brandy exports, according to Chinese customs data.

Trade tensions between China and Europe have been mounting over the past year, with both sides trading accusations of unfair competition and protectionism. Most recently, the EU said in December it would begin an anti-dumping investigation into biodiesel imports from China. Shares in French spirits companies Remy Cointreau and Pernod Ricard fell after the news, with Remy shares down more than 11% at their lowest since early 2020. The companies sell cognac, brandy from the Cognac region of France, under brands including Remy Martin and Martell.

Pernod Ricard derives 10% of its group sales from China and cognac accounts for over 50% of Pernod Ricard sales in China. Shares in LVMH, Europe's second most valuable listed company which owns Hennessey were down more than 2% in midmorning trade in Paris. They were the biggest loser in percentage terms on the blue-chip euro-zone stock index

Remy Cointreau declined comment. Pernod Ricard and LVMH did not immediately respond to requests for comment. "China moves are a shot across the bow to let Europe know that it too can plan hardball against rising protectionism in Europe," said Shaun Rein, founder and managing director of Shanghai-based China Market Research Group.

He said Beijing's move against European brands was a "counter strike" in response to what he described as EU's attacks on China's electric vehicle sector. 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 a European Union anti-subsidy probe backed by Paris into Chinese-made electric vehicles, that was launched in September, as "protectionist". China has launched trade probes during past spells of political tensions. In 2020, during a diplomatic dispute with Australia, China levied anti-dumping and anti-subsidy tariffs on Australian wine and other imports from the country.

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 appeared to be following a similar script with Brussels.

"This is a first, very targeted response, and aims to serves 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.”