China said it has begun an anti-dumping inquiry 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 liters or less in 2019, the ministry said in a statement. It would also examine any damage to the Chinese wine
industry from 2015-19.
The inquiry 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 by 20 percent 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."
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.
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," Australia's Minister for Trade Simon Birmingham said in an emailed statement.
He said China had also advised it was considering a request to launch an investigation into countervailing duties, an import tax imposed to prevent dumping or counter export subsidies.
"Australian wine is not sold at below market prices and exports are not subsidised," Birmingham said.
The China Alcoholic Drinks Association said Australian wine producers had cut their prices and were taking market share away from local companies, which had experienced a rapid deterioration in production and operating conditions.
China's imports of Australian wine more than doubled to 12.08 million liters between 2015 and 2019, the association said. The price of imports fell by 13 percent to US$6,723 a kilolitre, it added, citing Chinese customs data.
Over the same period, the market share of domestic wine fell from 74.4 percent to 49.6 percent, it said.
Australian 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 percent 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."

China opens Australian wine dumping inquiry