Could China Become The Thorn In Bordeaux’s Side Over Wine Dispute?

Not so long ago China was the goose that laid the golden egg as far as Bordeaux was concerned. Wines were snapped up, the market boomed and prices shot through the roof. Chinese investors are still keen to acquire Bordeaux’s chateaux (it’s estimated that over 60 estates have been bought up this year alone) and

Bordeaux wine inspired theme parks, tourist attractions and chateaux are being built in China. But the Chinese are not as keen as they once were to buy Bordeaux’s wines. There are several reasons behind this (over pricing being the predominant one) but China’s penchant for protectionism is another.

Reuters has reported that China has not dropped its investigation into French wine exports despite a recent deal with the European Union designed to defuse trade tensions, creating unease about Beijing’s intentions. The Chinese government has threatened to impose an anti-dumping tax on European wines, which was widely considered to be retaliation for an EU move to impose punitive duties on Chinese solar panels.

The tariff on solar panel imports from China is 11.8% and the EU was threatening to raise it to more than 47%. The solar panel issue was by far the largest trade dispute between Brussels and Beijing, but they reached an agreement to avert the rise in duty. EU officials said they had received reassurances the wine investigation would also be dropped.

However Reuters reports that Beijing has caused confusion by sending a 45-page questionnaire in Mandarin to France, Spain and the European Commission. Beijing also set a tight deadline: it sent the questionnaire November 28th and wanted replies by December 19th.

Apparently the Chinese investigation could also represent a negotiating tool in a separate dispute over telecoms:

“The Commission told Beijing in May it was ready to open an anti-dumping and anti-subsidy investigation into Huawei, the world’s number two telecoms equipment manufacturer, and ZTE, the world’s fifth largest.”

The wine investigation appears to be a very useful bargaining tool for the Chinese – and somewhat of a thorn in Bordeaux’s side. It also seems that my previous thoughts on the subject are being confirmed: that China is taking protectionist steps with regards to its domestic wine industry.

The China Alcoholic Drinks Industry made a formal request in 2012 to the Ministry of Commerce to look into their worry that wine imports from Europe are harming domestic producers. What’s more if French wine imports continue to interfere with China’s 12th Five-Year-Plan (2011 – 15) for the domestic wine industry we could see taxes put upon imported wine to encourage the Chinese to buy local. Interrupting the flow of wine imports to China also allows their own domestic wine industry time to consolidate and expand.

China is the world’s biggest importer of Bordeaux and although the Bordelaise are playing the dispute down it is having an effect in that its making Chinese wine importers nervous. Some orders have been placed on hold and coupled with the Chinese government’s crackdown on gift giving and banquets (an attempt to up its anti-corruption stance) this is slowing down the Chinese wine market.

It was reported yesterday that China would welcome talks with the EU on the issue and that China denied any suggestion that the investigation was linked to the dispute over solar panels. China-based European companies in the wine business held a first meeting in November to tell Beijing that EU exports respected the norms of world trade and there was no dumping. They expect to meet again in February.

The wine investigation is allocated a 12 month period, which can be extended 6 months up to the end of 2014.

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