China has launched an anti-dumping investigation into imported wines from Australia, adding to an already tense trading relationship between the two nations as disputes roll on over a dairy deal, tariffs on barley and territory claims.

China’s ministry of commerce began the investigation on August 18, and is examining whether or not exporters of Australian wine are selling the product below market price in China. The probe covers wine held in containers of 2 litres or less from Australia and will take 12 to 18 months to complete.

Speaking in response to the news, Australia’s trade minister Simon Birmingham, says: “We do find this deeply troubling, concerning and perplexing given Australia’s wine industry is not subsidised to export and it’s certainly not dumping product on the world market.

“It’s for China and Beijing to explain the rationale behind these actions and why they have moved to the stage of an investigation.”

Beijing has advised the Australian government that it is also considering launching investigations into countervailing duties in relation to Australian wine, Birmingham adds.

China is Australia’s top export market, and by far the most lucrative destination for the country’s wine exports, according to the government’s industry authority, Wine Australia. In the 2019-20 financial year, China accounted for A$1.1bn-worth of Australian wine exports, more than double that of the nation’s second biggest market, the US, at A$430mn.

Australia also holds the largest share of China’s imported wine market at 37%, ahead of France (27%) and Chile (13%), shows data for the 12 months ended May 2020 in Wine Australia’s August report, citing figures from Global Trade Atlas.

In another knock to bilateral relations, two days after the investigation was announced, the Australian Financial Review reported that Australia will not approve China Mengniu Dairy Company’s proposed A$600mn acquisition of Lion Dairy & Drinks, an Australian-based, Japanese-owned dairy and drinks manufacturer.

A statement released by seller Kirin Holdings on August 25 reveals that approval for the deal was not granted by Australia’s Foreign Investment Review Board (FIRB), leading to the termination of the agreement.


Souring trade terms

The relationship between China and Australia has been on a downward trajectory since Canberra called for an independent global investigation into the origin of the Covid-19 virus, widely thought to have started in Wuhan, China.

The investigation was met with an angry response by Beijing. “The so-called independent review proposed by the Australian side is political manoeuvring in essence,” foreign ministry spokesperson Geng Shuang said on April 23.

Shortly after, China imposed an 80% tariff on Australian barley imports and banned beef shipments from four major producers in the country over labelling and health certificate requirements. Australian barley producers now face a 73.6% anti-dumping tariff and a 6.9% anti-subsidy tariff applied to all their exports to China.

China has insisted its actions on trade policy are independent of the inquiry.

Birmingham says he can understand why” people are concerned about the latest move on wine by China, given the measures taken against the Australian barley industry. “And given the fact that what we believed were compelling cases in relation to barley were not found in terms of China’s final determination, and they did proceed with the application of tariffs on Australian barley,” he says.

Separately, China has also condemned actions taken by Australia over its new security laws imposed on Hong Kong. The Australian government suspended its extradition treaty with the special administrative region and is now offering new and extended visa options to students and skilled workers from Hong Kong, allowing Hong Kong passport holders to remain in Australia, with pathways to permanent residency.

“They [measures] constitute gross interference in China’s internal affairs, and China doesn’t accept it. We express strong condemnation and reserve the right to make further reaction, and Australia should bear all the consequences,” said Chinese foreign ministry spokesman Zhao Lijian at a press briefing on the matter in July.

The same month, Australia spurned China’s territorial and maritime claims over the South China Sea, a key shipping route and home to island chains potentially rich in natural resources.

A declaration to the UN, submitted on July 23 by Australia, reads: “Australia rejects China’s claim to ‘historic rights’ or ‘maritime rights and interests’ as established in the ‘long course of historical practice’ in the South China Sea.”

Even before the pandemic, tensions were building between the two. Sparks began to fly in August 2018 when the Australian government blacklisted Huawei and ZTE from its 5G network in response to security advice.

In an interview with Sky in February 2019, Chinese ambassador Cheng Jingye said the ban was “politically motivated”, dismissing concerns that Huawei presents a threat to Australia’s national security because of its connections to the Chinese government. “It has become a sore point or a thorny issue in bilateral relations as it damages mutual trust between the two sides,” he said.