Bloomberg（英文）： （赵永升） China Probes EU Liquor, Sinking Shares as Trade Spat Worsens

（来源：Bloomberg（英文） 2024-01-05）

l European distiller stocks Pernod, Remy drop in Paris trading

l   China earlier slapped tariffs onAustraliawine amid tensions

China is launching an anti-dumping investigation into liquor products like brandy from the European Union, in a relatively modest step after the bloc opened a probe last fall into its electric vehicle subsidies.

The investigation, which Beijing said was prompted by an application from a domestic liquor association, targets French cognac, a niche but lucrative product in China for producers like Pernod Ricard SA and Remy Cointreau SA, and sent their stocks plunging.Francewas the main backer of Brussels’ probe into Chinese EVs, with French carmakers Renault SA and Stellantis NV particularly exposed to the threat of imports.

The brandy industry is a small one — China imported $1.57 billion worth of spirits from distilled grape wine in 2023 through November, while exporting about $12.7 billion worth of electric vehicles to the EU in the same period — and appeared aimed at negotiating with Brussels.

The European Commission is assessing the documentation it received and will intervene “as appropriate, in close cooperation with the EU industry concerned,” spokesperson Olof Gill said in response to a query from Bloomberg.

A trade group for the cognac industry said the Chinese probe is taking place in the context of an unrelated spat between the EU and Beijing.

“We are confident that our products and commercial practices fully comply with Chinese and international regulations and also that EU & China will find a constructive way to resolve any bilateral disputes, as has happened in the past over other matters,” Valerie Mabin, a spokesperson for BNIC, said in an emailed statement.

“Francehas the biggest exposure to the investigation into brandy,” said Bruce Pang, chief economist at Jones Lang LaSalle Inc. “China is trying to add pressure on the biggest supporter of the EU’s Chinese EV probe.”

News of the probe sent Remy Cointreau tumbling as much as 12.5% in Paris while Pernod Ricard fell as much as 5.6%. These companies sell French brandy called cognac inChinaunder brands like Remy Martin and Martell.

Analysts for Jefferies Financial Group Inc. wrote in a report that the selloff in Pernod shares was “overdone,” sinceChinaaccounts for about 10% of Pernod’s overall sales, of which about 8% are cognac. A 2013Chinadumping probe into EU wine imports, launched in response to tariffs on Chinese solar panel imports, was dropped within a year, the analysts noted.

Beijing has a history of using trade to help it achieve its policy goals. It previously looked into foreign liquor imports when geopolitical tensions flared withAustralia, resulting in the imposition of anti-dumping tariffs on Australian wines, decimating what had been one of the country’s major overseas markets. As ties improved,Chinastarted to review the curbs.

“Chinais showing Europe what retaliation could look like if it slaps duties on Chinese EVs,” said Noah Barkin, senior adviser at Rhodium Group. “This move would hit wine-producing countries likeFrancethe hardest — and that is probably no coincidence. Macron’s government was the strongest supporter of the EU’s anti-subsidy probe into EV imports fromChina.”

WhileChinarepresents a major market for European liquor brands, which have been struggling with a sharp drop in US demand, it is a small industry in a country that largely drinks the local alcohol called baijiu.

China ’s investigation will focus on brandy products that come in smaller than 200 liter containers from the EU,China’s Ministry of Commerce said Friday.

With cognac considered a premium product inChinathat sells at prices far higher than local alcohols, the dumping charge is “quite stretched,” said Gilles Guibout, a portfolio manager at Axa Investment Managers in Paris. “This is purely retaliation for EV.”

The EU’s recent trade actions towardChinahave extended beyond electric vehicles. Last month, the EU also opened anti-dumping probes into Chinese biodiesel and melamine exports. In November, the bloc imposed provisional antidumping duties on imports of some plastics products fromChina.

Zhao Yongsheng, a professor at the University of International Business and Economics in Beijing, said he doesn’t think the new brandy investigation is a sign of a trade war starting betweenChinaand EU.

“It’s a retaliation but a reasonable one,” he said. “Chinahas chosen a product with little impact on EU, but the message is that it can target much more important European goods in the future” such as wine, luxury products and cars.

Zhao Yongsheng, director of the French Centre for Economic Research at the University of International Business and Economics (UIBE) in Beijing

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