China is opening an investigation into the price of brandy imported from the European Union in a move seen as retaliation for the bloc’s probe into an influx of cheap Chinese electric cars into Europe.
The Chinese Ministry of Commerce told reporters Friday that it had launched the anti-dumping investigation at the request of local liquor producers. Dumping refers to the practice of exporting goods to a country at prices that do not reflect their cost.
China is an important market for European brandy producers, and news of the probe sent shares of luxury consumer goods groups tumbling.
Agatha Kratz, director at Rhodium Group, said the vast majority of the companies that could be affected by Beijing’s investigation were French cognac brands.
“China has become such a big market for spirits, and French spirit companies,” she told CNN. “In 10 years, (China has) become one of their key revenue drivers and growth drivers.”
Shares of Pernod Ricard fell nearly 5% in Paris. The company owns Martell, a maker of cognac dating back more than 300 years. Rémy Cointreau’s stock plummeted over 11%, while Bernard Arnault’s LVMH, which owns Hennessy cognac, dropped 2%.
Kratz said she believes the move was in retaliation for France’s strong support for the EU probe into suspected anti-competitive trade practices by China.
In September, the European Commission, the bloc’s executive arm, said it had launched an investigation into Beijing’s possible use of “huge state subsidies” to keep prices for its electric vehicle exports “artificially low.”
“Global markets are now flooded with cheaper Chinese electric cars,” European Commission President Ursula von der Leyen said in a speech. “This is distorting our market,” she added.
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