The move will mainly affect French cognac, which makes up most of China’s brandy imports, casting a shadow over the already tense trade relations between Beijing and Brussels.

“When China announces an investigation, it is the start of the ban on French cognac, an effective ban. It signals to society in China that cognac is no longer in favour,” said Ian Ford, the Shanghai-based founder and chief executive of Nimbility, a brand and sales management company for alcohol sold in Asia.

“Therefore, if you’re at a big banquet, entertaining a government official, it’s taboo now to be drinking or gifting cognac.”

Frank Lin, a Guangdong-based dealer specialising in spirits, said there are few brandy producers in China that could substitute the cognac produced by the likes of Hennessy, Martell and Remy Martin.

“Although European brandy has a relatively small market share in Chinese alcohol consumption, the recent anti-dumping investigation is expected to have a far-reaching impact on the market,” Lin said.

“Industry insiders are concerned that this investigation could escalate to other European red wine brands, thus triggering a full-scale confrontation between China and Europe in the alcoholic beverage sector.”

Ministry of Commerce spokeswoman Shu Jueting said that the anti-dumping investigation was “in accordance with World Trade Organization (WTO) rules and relevant Chinese laws and regulations”, during a press conference on Thursday.

“It is alleged that the quantity of related brandy products imported from the EU has increased rapidly and the price has been on a downward trend, causing difficulties in the operation of the domestic industry,” Shu added.

Beijing said there was “a lack of sufficient evidence to support” the claims, and that the inquiry was “inconsistent with relevant WTO rules”.

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China’s imports of brandy rose significantly between 2017 and 2021. The total value of brandy imports declined by 16.5 per cent from 2021 to US$1.42 billion in 2022, according to data from the liquor importers and exporters branch of the China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce and Animal By-Products.

The latest data, from January to September last year, showed the total imported value of brandy rose by 36.38 per cent over the same period in 2022 to US$1.12 billion.

While Chinese consumers have traditionally favoured baijiu, a strong liquor distilled from fermented sorghum, China has been a major export market for French cognac, a barrel-aged grape brandy produced in France under strict legal conditions.

However, the trend for French cognac consumption in China has changed over the years, according to Mike Mai, a director of the government relations and marketing department at a Guangdong-based new energy technology company.

“Although from a cost perspective, [businesspeople] preferred cognac, for example, a three-litre bottle of XO sells for about 2,000 yuan (US$281), equivalent to a one-litre bottle of premium domestic liquor,” said Mai.

“However, the trend has changed in recent years, with officials and state firm executives favouring domestic baijiu liquor since seven or eight years ago.”

Mai said brandy has almost disappeared at banquets, with baijiu becoming the top choice for the business community.

In the 1980s, as Hong Kong businessmen brought capital and export orders to China’s southern Guangdong province, they also introduced French cognac to the region, according to Zhu Rui, a veteran exporter in his 60s.

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“Overseas Chinese often brought brandy as gifts when they returned to China to visit their relatives, and French brandy became a symbol of luxury gifts,” Zhu said.

“However, today’s younger Chinese generation prefers red wine and whisky from other countries, and are no longer as enthusiastic about European-branded brandy as they once were.”

In September, Moët Hennessy, the wines and spirits division of French luxury group LVMH, opened its flagship shop on Xiaohongshu, also known as Little Red Book, which is one of the most popular social media and e-commerce platforms among young people in China.

The shop offers wine, champagne, as well as cognac, at a range of prices, with the most expensive a Hennessy XO, launched last year in collaboration with fashion designer Kim Jones, and priced at over 2,500 yuan.

Amid China’s anti-dumping inquiry, the three French cognac makers are offering discounts of between 30 and 50 per cent on several products on Chinese online shopping platform Taobao.

The Lunar New Year, which begins on February 10, is traditionally a peak season for gifting in China.

The “year of dragon” edition cognac celebrating the upcoming holiday by Remy Martin has been reduced from 1,019 yuan to 710 yuan, although it is listed as sold out.

Mariana Lam, the Hong Kong-based founder of import and retail firm WineWorld, believes the trend for Chinese consumers to buy domestic brands is set to continue.

“The foreign companies have been making an effort to localise their products to increase their appeal to Chinese consumers,” said Lam.

“But the consumption trend is also changing, with customers taking into account the cost as well, whether it’s gifting or it’s for themselves.”

Nimbility’s Ford said premium baijiu and high-end Burgundy and Bordeaux wines may replace some of the cognac sales in China, while Chinese made brandy by Shandong-based Changyu could also capture some of the market share.

“[Changyu] has a very solid brandy business,” Ford said. “In the early days I wouldn’t go near it, but I think it’s come a long way.”