Beijing Targets European Brandy Following Electric Vehicle Subsidy Dispute

The oak barrels, decanters and bottles are stored in the cellers of Chateau Laballe (Bas-Armagnac appellation), where Armagnac is produced in Parleboscq, in southwestern France on Sept. 6, 2023. Gaizka Iroz/AFP via Getty Images

Chinese authorities earlier this month initiated an anti-dumping investigation against brandy liquor imported from the European Union (EU), a move seen as a “tit-for-tat” response to an EU probe into Chinese subsidies for electric vehicles (EVs).

The European Commission pushed ahead with an anti-subsidy probe into Chinese EV imports in September, accusing China’s massive state subsidies of artificially depressing the price of EVs and accordingly distorting market competition.

The EU probe would probably lead to punitive tariffs on Chinese EVs.

Countering the EU’s move, China’s Ministry of Commerce announced on Jan.5 that an anti-dumping investigation on EU-made liquors started on the same day and was expected to last up to 24 or 30 months. It explicitly stated that this investigation was conducted at the request of the China Alcoholic Drinks Association, which is said to have filed the petition late last year.

Later that day, the market of several major European liquor groups immediately plunged, with shares of Remy Cointreau, a major spirits maker, plummeting 10.93 percent to 97 euros that morning.

Cognac accounts for two-thirds of the company’s sales, while China consumes nearly 30 percent of Cognac sales, according to an analysis by financial services group Oddo BHF.

Pernod Ricard, the world’s second-largest producer of spirits and wine, slid 4.76 percent in shares.

Even luxury giant LVMH (Louis Vuitton Moët Hennessy) was not immune, with its shares sliding 1.96 percent due to part of its business involving wines and spirits.

The liquor market downturn also rippled out to other EU countries; Campari, a typical Italian liqueur, saw its shares decrease by 1.99 percent. Diageo, the U.K.’s leading whisky company, met with a 1.87 percent decline.

U.S.-based current affairs commentator Xing Tianxing told The Epoch Times on Jan. 9 that the Chinese Communist Party (CCP) is targeting European Brandy as its substantive retaliatory measure against the EU as Brandy is a pivotal export item for European countries.

Between January and November 2023, China imported US$1.57 billion of distilled wines, such as cognac and brandy, 99 percent of which originated in France.

Similar retaliatory measures had been frequently employed against other countries as economic coercion of the CCP, according to Mr. Xing, with Australia being a stark example.

In April 2020, Australia proposed an international investigation into the origin of the COVID-19 virus, which was spreading through the world from the central Chinese city of Wuhan due to the cover-up of the CCP authorities.

The Australian government’s insistence on uncovering the truth about the epidemic infuriated the CCP, which unofficially banned imports of coal, sugar, barley, lobsters, wine, copper, and logs from Australia. On Nov.27, 2020, the Ministry of Commerce declared the implementation of anti-dumping measures on Australian wine, imposing tariffs of up to 212 percent.

CCP-Orchested EV Industry Expansion

To dominate the international EV market, the CCP has injected considerable state funds in subsidies to prop up a low-priced EV industry to capture the global market, which is barbaric behavior that squeezes other nations, Mr. Xing said.

European Commission President Ursula von der Leyen speaks during a media conference on the Chips Act at EU headquarters in Brussels on Feb. 8, 2022. Virginia Mayo/AFP via Getty Images

Ursula von der Leyen, president of the EU Executive Committee, stated in the European Parliament on Sept. 12, 2023, that the committee would launch an investigation into counter-subsidies for Chinese electric vehicles.

“Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies,” said Ms. von der Leyen.

“Europe is open to competition. Not for a race to the bottom,” she said.

Sigrid de Vries, director general of the European Automobile Manufacturers’ Association, said that Chinese EVs have affected “European auto makers’ domestic market share.”

Chinese automotive brand BYD Auto has expanded to 15 European countries, relying on price advantage; its electric model Atto3 was the best-selling EV in Sweden in July.

Using the solar industry as an example, Ms. von der Leyen told MEPs, “We have not forgotten how China’s unfair trade practices affected our solar industry. Many young businesses were pushed out by heavily subsidized Chinese competitors. Pioneering companies had to file for bankruptcy.”

French Finance Minister Bruno Le Maire has sided with the EU’s decision to investigate China’s state subsidies on EVs.

“If those subsidies do not conform to the rules of international trade, Europe needs to be able to have a response, to stay competitive and defend its economic interest,” said Mr. Le Maire.

State-owned media claimed that from 2009 to 2021, the CCP regime had thrown financial subsidies amounting to 129.5 billion yuan (about $18 billion) into the EV industry, supporting more than 1,959,900 EVs.

This photo taken on Jan. 10, 2024, shows electric cars for export waiting to be loaded on the "BYD Explorer NO.1", a domestically manufactured vessel intended to export Chinese automobiles, at Yantai port in eastern China's Shandong Province. STR/AFP via Getty Images

Boosted by enormous funds, China’s EV sales have increased more than 260 times in 12 years, from 5,209 units in 2009 to 1,367,000 units in 2020, with year-on-year increases of more than 100 percent in 2009, 2014, and 2015. In the first 10 months of 2021, even during the pandemic, sales of EVs exceeded 2.5 million units.

Mr. Xing believes that the CCP’s approach is contrary to how the international market operates, and “it [the CCP] uses this kind of economic coercion as a strategic weapon, first to encroach the overseas market, then to entice politicians to back down on economic interests, thus further influence or manipulate Western powerhouses.”

Therefore, if all countries unite and adopt self-protection measures, it will deter CCP’s scheme, Mr. Xing added.

Raising another layer of opinion, media worker Lai Yiming said that CCP’s overseas expansion through cheap Chinese electric cars is a “narrow trade policy” that squeezes other market partners, which will cause Chinese foreign trade enterprises to suffer significant losses.

“It is also part of the self-destructive pattern of the totalitarian regime,” Mr. Lai said.