BEIJING: China said on Tuesday (Aug 18) it has begun an anti-dumping probe into imports of Australian wine in a move that will likely worsen tensions between the two countries and knocked a fifth off the share price of Australia's biggest winemaker.
The investigation by China's Ministry of Commerce (MOFCOM) will look at imports of wine from Australia in containers holding two litres or less in 2019, the ministry said in a statement.
READ: Australia will not be 'intimidated' amid China economic threats: PM Scott Morrison
It would also examine any damage done to the Chinese wine industry from 2015-19.
The probe was requested by the Chinese Alcoholic Drinks Association, which asked the regulator to look into 10 Australian wine producers, including Treasury Wine Estates, the maker of Penfolds, and Accolade wines.
Shares of Treasury, the world's biggest standalone winemaker, fell up to 20% as the industry and investors worried about the prospect of a possible import tax on Australian wine.
The company said in a statement it would cooperate with any requests for information from Chinese or Australian authorities and remained committed to China as a "priority market".
Accolade was not immediately available for comment.
The probe comes against a backdrop of increasing tensions between the two countries after Canberra called for an international enquiry into the origins of the novel coronavirus.
China is the top market for Australian wine exports and the country is also Australia's largest trading partner, with two-way trade worth A$235 billion (US$170 billion) last year.
READ: Australia requests China trade talks, won't drop COVID-19 inquiry push
China recently imposed dumping tariffs on Australian barley, suspended some beef imports and warned Chinese students and tourists it wasn't safe to travel to Australia because of allegations of racism.
"This is a very disappointing and perplexing development," said Australia's Minister for Trade Simon Birmingham in an emailed statement.
"They have also advised Australia that they are considering a request to launch a countervailing duties investigation. Australian wine is not sold at below market prices and exports are not subsidised."
He told reporters he had not spoken with his Chinese counterpart, or other senior Chinese government officials, since May when he requested discussions in light of the barley tariff.
The China Alcoholic Drinks Association said Australian wine producers had cut their prices over the years and were taking market share away from domestic companies. Local firms had experienced a rapid deterioration in production and operating conditions as a result, it said.
China's imports of Australian wine grew from 5.67 million litres in 2015 to 12.08 million litres in 2019, the association said. The market share of domestic wine fell over the same period from 74.43 per cent to 49.58 per cent over the same period, it added.
Australia industry figures show the country sells more wine to China than France, exporting A$1.1 billion (US$795 million) of product in 2019/20 for a 37 per cent 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.
"Our wine's more expensive than virtually any wine-exporting country in the world," he added.
Tony Battaglene, chief executive of industry body Australian Grape & Wine Inc, said China's move was unexpected and could lead to a tariff being applied to all of the roughly 1,200 Australian winemakers which export product to China.
"As in the barley case they can apply a tariff across the board," he said. "It can apply at a company level and at a national level. It would be detrimental, there's no doubt about it."
Australian wine exporters including Treasury faced blocks and delays in 2018 when Chinese customs officials held up shipments. Bilateral relations were strained at the time after the Australian government accused Beijing of meddling in domestic affairs.
Fund manager Macquarie Equities said it was reviewing its investment rating of Treasury Wine due to "increased geopolitical risks", and warned of the possibility of additional tariffs.