China says it is imposing anti-dumping measures on brandy imports from the European Union, marking the latest development in the growing trade dispute between Beijing and Brussels.
The decision follows the EU's recent imposition of steep tariffs on Chinese electric vehicles (EVs).
France is likely to be the most impacted by China's new measures, as it is the largest exporter of luxury drinks to China such as cognac and armagnac.
China launched an investigation this year into EU brandy imports into China, months after the bloc undertook a probe into Chinese EV subsidies.
Beijing said in August it would not impose provisional tariffs on brandy makers, even though it had found evidence of dumping, but did not rule out subsequent measures.
But after the EU slammed tariffs on Chinese EV's last week, Beijing decided to retaliate with extra tax on EU liquor and operators will have to pay a "corresponding guarantee" to Chinese customs when importing EU brandy into the country, the commerce ministry in Beijing said in a statement.
The amount would be based on calculations involving prices approved by customs, as well as import taxes.
The investigation had "preliminarily determined that imports of certain brandy originating from the European Union were being dumped, threatening substantial damage to the domestic brandy industry," the ministry said.
The probe also established "a causal relationship between the dumping and the threat of substantial damage".
Shares plummet
The ministry released a list detailing the rates each company would expect to pay, ranging from 30.6 percent for cognac house Martell to 39 percent for Jas Hennessy and 38.1 percent for Remy Martin.
Shares in French spirits giants Remy Cointreau and Pernod Ricard fell sharply in Paris on Tuesday following the news.
France's main cognac industry group said it had not yet received details of the new rules but the announcement sent an "additional signal" that China intended to implement further taxes.
"We will already have to pay money" for the guarantee given the biggest cognac exporters already have their own import subsidiaries in China, said Raphael Delpech, director general of the National Interprofessional Cognac Bureau (Bnic).
On 4 October, after the EU vote to impose tariffs on Chinese EVs, the Bnic issued a statement saying the higher tariffs would reinforce "the imminent threat of surtax on Cognac exports to China", deporing that requests to postpone the vote and for a negotiated solution had been ignored.
"The French authorities have abandoned us. We do not understand why our sector is being sacrificed in this way," according to the French brandy makers, who now fear that Beijing's surtax "could exclude [French cognacs] from the Chinese market".
Status symbol
"The thirst for French alcohol prevails," said a report by Shanghai-based research group Daxue Consulting, published to coincide with the 60th anniversary of Sino-French relations in January 2024.
In 2022, France emerged as the leading exporter of alcoholic beverages to China, reaching a total value of €773 million, according to the report, pointing out that foreign liquors in China "serve as a status symbol, often reserved for special dinners and social gatherings".
France has a 98.8 percent market share of hard liquor, according to the report.
Earlier this year, when Chinese President Xi Jinping visited France, French President Emmanuel Macron thanked him for not imposing customs duties on French cognac, presenting him with bottles of the expensive drink.
But the EU gave a definitive green light last week to imposing extra tariffs of up to 35.3 percent on EVs imported from China, saying Beijing has unfairly subsidised its domestic industry to the detriment of European automakers.
Brussels is also investigating Chinese subsidies for solar panels and wind turbines.
And Beijing launched a probe into EU subsidies of some dairy and pork products imported into China.
Asked about the brandy measures and those probes on Tuesday, Beijing's commerce ministry said the investigations were being conducted in "accordance with the law".
A spokesperson reiterated that Beijing was mulling measures such as "raising tariffs on imported large-displacement fuel vehicles", referring to cars with larger engines that typically produce more emissions.
"China will take all necessary measures to firmly safeguard the legitimate rights and interests of Chinese industries and enterprises," the spokesperson said.
(with newswires)
