UPDATE 3-China hits back at EU wine over solar panel duties
* China launches anti-dumping and anti-subsidy probe of EU wine
* Move targets south European supporters of solar panel duties
* Germany calls for negotiated settlement
By Terril Yue Jones
BEIJING, June 5 (Reuters) - China hit back at European wine exports on Wednesday in response to the European Union's decision to impose duties on imports of Chinese solar panels, as tensions increased between two of the world's biggest trading blocs.
In a step targeting southern European states such as France and Italy that back the duties but largely sparing north European opponents such as Germany, Beijing said it launched an anti-dumping and anti-subsidy probe into sales of European wine.
The EU will impose duties on imports of Chinese solar panels from Thursday, but announced a dramatically reduced initial rate after pressure from some large member states led by Berlin in the hope of negotiating a settlement with Beijing.
China's Commerce Ministry said the EU's duties were imposed despite China making great efforts and showing enormous sincerity in trying to resolve the matter through talks.
"The European side still obstinately imposed unfair duties on Chinese imports of solar panels," the ministry said in a statement on its website (www.mofcom.gov.cn).
In a cautious first reaction, German Economics Minister Philipp Roesler renewed Berlin's call for a negotiated solution and warned of the danger of wider trade confrontation.
"The EU must always negotiate and I think there's still the chance to quickly sit at the table and agree on a fair framework and definitely avoid a trade war that would affect many more areas than the photovoltaic sector," he told German television.
The Chinese ministry said the government had begun the probe into EU wines at the request of Chinese wine makers.
"The Commerce Ministry has already received an application from the domestic wine industry, which accuses wines imported from Europe of entering China's market by use of unfair trade tactics such as dumping and subsidies," it said in a statement.
"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 move appeared largely symbolic and less severe than if China had targeted hi-tech exports such as Airbus aircraft, made by Toulouse-based European aerospace group EADS.
FRANCE HIT HARDEST
Beijing imported 430 million litres of wine last year, of which more than two-thirds came from the EU, according to Chinese customs figures. Imports from France alone came to 170 million litres.
Diageo and Pernod are among the suppliers.
China is the third biggest export market for French wines and spirits by value, worth 1 billion euros ($1.31 billion) in 2012 or nine percent of Paris' wine and spirits exports, according to the FEVS producers' federation.
Jim Boyce, who runs the wine blog grapewallofchina.com, said Chinese manufacturers have been upset about alleged dumping for a while.
"The big issue was all this Spanish wine flowing in here at incredibly low prices," he said.
The European Union is China's most important trading partner, while for the EU, China is second only to the United States. Chinese exports of goods to the 27-member bloc totalled 290 billion euros ($376 billion) last year, with 144 billion euros going the other way.
Wine sales are only a fraction of overall exports to the rising Asian economic powerhouse but the move raises the risk of more tit-for-tat trade barriers.
The EU now has 31 ongoing trade investigations, 18 of them involving China. The largest to date is that into 21 billion euros of imports from China of solar panels, cells and wafers.
The EU says it has evidence that Chinese firms are selling solar panels below cost - a practice known as dumping. But the initial duty of 11.8 percent announced on Tuesday by European Trade Commissioner Karel De Gucht was far below the average 47 percent that had been planned.
China's Commerce Ministry said it took note of the lower initial rate, but called on the EU to "show more sincerity and flexibility to find a resolution both sides can accept through consultations".
China does not want to see this spat affect the overall state of trade ties with Europe, it said.