China launched an anti-subsidy investigation on some wine imports from Australia

Reuters reported that China's commerce ministry said on Monday it had launched an anti-subsidy investigation on some wine imports from Australia, according to a statement posted online.

The ministry said the investigation would be done on wine "packed into containers of two liters or less."

China already began an anti-dumping probe into imports of Australian wine announced last Tuesday in a move that knocked a fifth off the market value of Australia’s biggest winemaker.

Background

Reuters reported last week that the China Alcoholic Drinks Association said Australian wine producers had cut prices and were taking market share from local companies, which had seen a rapid deterioration in production and operating conditions.

China’s imports of Australian wine more than doubled to 12.08 million litres between 2015 and 2019, the association said. The price of imports fell 13% to $6,723 a kilolitre, it added, citing Chinese customs data.

Over the same period, the market share of domestic wine fell from 74.4% to 49.6%, it said.

Australian industry figures show it sells more wine to China than France, with exports worth A$1.1 billion ($795 million) in 2019/20 for a 37% market share of China’s imports by dollar value.

“The export data doesn’t support any facts that we’re dumping wine,” said David Harris, managing director of South Australian Wine Group, which was named in the investigation.

The China Alcoholic Drinks Association said Australian wine producers had cut prices and were taking market share from local companies, which had seen a rapid deterioration in production and operating conditions.

Market implications

China is the top market for Australian wine exports and is also Australia’s largest trading partner, with two-way trade worth A$235 billion ($170 billion) last year.

Australia’s trade minister, Simon Birmingham, previously called the investigation “very disappointing and perplexing” and said China was also considering a request to investigate countervailing duties, an import tax imposed to prevent dumping or counter export subsidies.

Such moves as these will fray relations and weigh on risk sentiment and the Aussie.