The risk of a tit-for-tat trade war between China and the European Union has escalated after Beijing launched an anti-dumping probe into European wine imports worth an estimated US$1.7 billion.
The investigation was announced in a statement from the Ministry of Commerce responding to news that the EU had decided to slap tariffs on imports of Chinese solar panels that Brussels says are being unfairly subsidised by Beijing.
The statement, quoting ministry spokesman Shen Danyang , called on the EU to show "more sincerity and flexibility" in resolving the solar dispute.
Ding Chun , an expert in European affairs at Fudan University, told the South China Morning Post it was clear that trade tensions had increased, although a full-scale trade war could still be averted.
"The actions taken by both sides so far are still rational," Ding said. "There is still room for negotiation."
China's wine investigation came after the EU said on Tuesday it would impose provisional anti-dumping duties of 11.8 per cent on photovoltaic products from mainland manufacturers from today. "We have noted the quick rise in wine imports from the EU in recent years, and we will handle the investigation in accordance with the law," the ministry statement said.
China's wine imports increased by 8.9 per cent to 430 million litres last year, of which 290 million litres, or 67 per cent, were from the EU, an increase of 5.8 per cent from the previous year, data from China's Customs Administration showed. Wine from France alone totalled 170 million litres last year, an increase of 11.3 per cent from the previous year.
The average price of imported wine was US$6 per litre, according to customs data.
China's anti-dumping investigation on European wine imports was inappropriate and reprehensible, said an official from France's trade ministry, who was quoted by Reuters. "The case is not treated on its own merit, but because a decision was taken in another area," the official said, referring to solar panel duties.
Hao Changsheng, a sales representative of Pompway, which sells wine mainly from France in China, said sales of imported wine would be affected if anti-dumping duties were imposed.
"We would need to increase retail prices inevitably if the levies were imposed," Hao said, noting that price rises were likely to weaken the competitive position of French wines in the market.
Chinese winemakers, which the ministry says complain that imported EU wine has hurt the development of the domestic industry, saw their shares rise sharply in response to news of the investigation. Trading in Yantai Changyu Pioneer Wine and Citic Guoan Wine was suspended yesterday after they reached their daily limit of a 10 per cent rise.