Industry Experts React to China's Anti-Dumping Probe into EU Brandy

China launched on Friday an anti-dumping investigation into brandy imported from the European Union, which will focus on brandy in containers of less than 200 litres (44 British gallons).

Trade disputes between China and Europe have been mounting over the past year, with both sides exchanging accusations of unfair competition and protectionism.

China imported $1.57 billion worth of spirits from distilled grape wine in 2023 through November and France accounts for 99.8% of all EU brandy exports, according to Chinese customs data.

Industry experts believe the investigation is a tit-for-tat response to EU probes against China's businesses, and is mainly targeted at France because it is seen as a more likely to convince the EU to drop some of its investigations.

Below are some of the views from experts:

ALICIA GARCIA HERRERO, CHIEF ECONOMIST FOR ASIA PACIFIC AT NATIXIS:

"(Brandy imports) may not be very big in size, but (the probe) has a very big impact in terms of warning Europe, especially France in this case, what may happen if the anti-subsidy investigation into European NEVs (new energy vehicles) continues. And why France? Because, I think, France is the easiest, big enough European country that can stop this, because Germany might not ... for Germany now, it is clear that (NEVs) are their largest industry and ... they don't want to compete with China on their own turf, i.e. in Europe."

SHAUN REIN, FOUNDER AND MANAGING DIRECTOR OF SHANGHAI-BASED CHINA MARKET RESEARCH GROUP:

"China's moves are a shot across the bow to let Europe know that it too can plan hardball against rising protectionism in Europe. Even Europe's largest companies rely on selling into China. France has also been vocal in pushing for an independent foreign policy from the U.S. and will push for closer economic relations with China."

MAX ZENGLEIN, CHIEF ECONOMIST AT THE BERLIN-BASED MERCATOR INSTITUTE FOR CHINA STUDIES:

"This very much seems to be in response to the EU probes and more importantly Frances's support in this regard. This is a first, very targeted response, and aims to serve as a warning towards the EU to tread carefully. It is still far from the escalation between China and Australia, but China is following a well-established pattern on applying economic pressure while limiting the damage to its own economy."

ALICJA BACHULSKA, POLICY FELLOW AT THE EUROPEAN COUNCIL ON FOREIGN RELATIONS:

"My first reaction to this brandy story is that it's quite bizarre and funny. However, given that brandy exports to China have been on the rise in recent years, and alcohol constitutes a considerable chunk of French exports to China, this move is not only symbolic – it might constitute a financial blow to some French producers. And while unlike EVs (electric vehicles), brandy is not a strategically important product, it is part of France's soft power and cultural appeal in China, alongside other luxury products."

BALA RAMASAMY, PROFESSOR OF ECONOMICS, ASSOCIATE DEAN AT THE CHINA EUROPE INTERNATIONAL BUSINESS SCHOOL:

"Any country or region that has a bloated trade deficit with China will find ways to reduce it, quite often at its own detriment. The EU's investigations into China's star EV industry will definitely be met with equal retaliation. Nearly all of China's import of brandy is from France, and given decreasing demand for it in recent months, the action is more optic than its effect. Unfortunately, market power and industrial policies are so vague that anything could be seen as trade distorting."

FRENCH COGNAC INDUSTRY ASSOCIATION, BUREAU NATIONAL INTERPROFESSIONNEL DU COGNAC:

"This investigation takes place in the context of a trade disagreement between the European Union and China on other industrial sectors, unrelated to our activity. We are confident that our products and commercial practices fully comply with Chinese and international regulations ... Technical cooperation in the spirit sector is excellent and historic between the two trading partners."

EDWARD MUNDY, EQUITY ANALYST AND ANDREI ANDON-IONITA, EQUITY ASSOCIATE AT JEFFERIES:

"The anti-dumping probe adds to existing negative sentiment on imports of cognac into China, over and above the weak macro and regulatory considerations. The Chinese domestic brandy industry is de minimis, with the investigation possibly a response to the anti-subsidy probe into Chinese EVs."

Reuters

January 06, 2024