China targets EU brandy in tit-for-tat anti-dumping probe
He said Beijing's move against European brands was a "counter-strike" to the EU's anti-subsidy probe in September into China's electric vehicle imports.
China has opened an anti-dumping investigation on brandy imported from the European Union, a step that appears to be mainly targeted at France and adds to ongoing 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 200 litres (44 British gallons) 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 $1.57 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 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 anti-dumping investigation into biodiesel imports from China. France's cognac industry association said it would 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 in a statement to Reuters. Remy Cointreau declined comment. Pernod Ricard and LVMH did not immediately respond to requests for comment.
The European Commission said it was assessing the documentation it had received, and will intervene in the framework of the investigation, as appropriate, in close cooperation with the EU industry concerned. SHARES HIT
"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" to the EU's anti-subsidy probe in September into China's electric vehicle imports.
Shares in French spirits companies Remy Cointreau were down more than 11% at their lowest since early 2020 at 1151 GMT and the biggest faller in percentage terms on the pan European STOXX 600 index, while Pernod Ricard was down 4.8%. The companies sell cognac, brandy from the Cognac region of France, under brands including Remy Martin and Martell.
The move comes as concerns have grown about slowing demand for luxury goods in China, the world's No. 2 economy, as a property crisis derails hopes of a post-pandemic spending spree. 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 1.9% in Paris. Italy's Campari, was down 2%. Last month, the company bought French cognac brand Courvoisier, aimed at expanding its footprint in China, which represents about 9% of revenues. It 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 a European Union anti-subsidy probe backed by Paris into Chinese-made electric vehicles, that 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 anti-dumping and anti-subsidy 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 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."
