China investigating Australian wine subsidies, doubling down on dumping probe

SHANGHAI/SYDNEY (Reuters) - China on Monday launched an investigation into alleged government subsidies of some Australian wine imports, a widely expected follow-up to an anti-dumping probe that Australian representatives said they would oppose.

FILE PHOTO: Bottles of Penfolds Grange, made by Australian wine maker Penfolds and owned by Australia's Treasury Wine Estates, sit on a shelf for sale at a wine shop in central Sydney, Australia, August 4, 2014. REUTERS/David Gray

The investigations come against a backdrop of increasing tensions between the countries after Canberra called for an international inquiry into the origins of the novel coronavirus, which was first detected in China’s central city of Wuhan.

Beijing imposed tariffs on Australian barley in May following accusations the grain was being exported at a loss, or “dumped”. It then suspended some beef imports, before starting an investigation into dumping of Australian wine, an accusation Australia has refuted.

China’s commerce ministry said in an online statement it would now investigate some 37 Australian wine subsidy schemes following a request from the China Wine Industry Association.

The second investigation, which would take up to a year, would look into Australian support measures including “farm risk management”, a “farm financing loan scheme” and “business growth funding projects”, the commerce ministry said.

Australian Trade Minister Simon Birmingham said the second wine probe had been “broadly foreshadowed” when the initial anti-dumping investigation was initiated.

“We strongly refute claims that initiatives like the Murray-Darling Basin Economic Development Program, or programs that support research and development equate to a subsidy of our wine exports,” Birmingham said in a statement, referring to a scheme where the government buys water to improve the health of key waterways.

“The government will work with our internationally renowned wine industry to mount the strongest possible case against these claims,” he added.

Shares of Australia's biggest winemaker, Treasury Wine Estates TWE.AX, were trading flat on Monday afternoon, in line with the broader market .AXJO, although the shares are down a quarter since China announced the anti-dumping probe.

China is the top market for Australian wine exports and is also Australia’s largest trading partner, with two-way trade worth A$235 billion ($170 billion) last year.

Reporting by Byron Kaye and Colin Packham in Sydney, and Emily Chow; Editing by Muralikumar Anantharaman and Lincoln Feast.