The Chinese government has recently announced that it will be examining claims from its domestic winemakers that Australian exporters have been selling wine for less than it costs to produce in order to steal more market share, and that Australian winemakers are subsidised.
While it is evident that Australian wine exports have indeed captured a considerable chunk of the Chinese market over the last few years, with exports increasing from $268m in 2015 to $1.75b in 2018/19, Australian producers and Chinese importers reject the dumping claims, indicating a willingness to cooperate fully with the 18 month probe.
Our Farmer database at KG2 consists of over 5000 vineyards who have been battling to rebound from bushfires, a drop in tourism and declines in cellar door sales.
The Chinese investigation could damage an already bruised industry looking to get back on its feet after a few tough years suffering the impacts of climate change.
There are fears that China’s probe into Australia wine exports to China may follow the same pattern as recent moves against our barley industry – using ‘technical’ trade measures to disguise what could be political sanctions.
The empirical evidence shows that the average price of wine units exported from Australia to China has increased over the last decade.
Australian wine attracts the second highest price per unit in China.
The high price of imported Australian wine in China has been relied on by Australian producers as evidence that it is not dumping low priced wine into the Chinese market.
After conducting significant amounts of market research within the Australian wine industry, the team at KG2 has concluded that the mere existence of the Chinese investigations is enough to have a negative impact on investment in the viticulture industry in Australia.
Wine makers will be forced to look elsewhere for new or expanded export markets.
The reality is however that all other markets pale in comparison to China’s size and value, with consequent impacts on profitability.
The Government has stated it will work with our internationally renowned wine industry to mount a defence against these claims.
The outcome of the current investigations will probably be known in 12 months, being the time it took for the Chinese to announce its decision with respect to barley.