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Xi Jinping escalated economic tensions with Europe by launching a tit-for-tat trade probe targeting luxury spirits producers that compete with China’s most valuable state-owned company.
The announcement by Beijing to examine price dumping among EU brandy vendors comes some three months after Brussels began investigating low-cost Chinese electric vehicle makers including BYD, which seized the sales crown from erstwhile leader Tesla in the fourth quarter for the first time.
“This investigation takes place in the context of a trade disagreement between the European Union and China on other industrial sectors, unrelated to our activity,” France’s cognac producer lobby group BNIC told trade publication Global Drinks Intel on Friday.
After Chinese EV manufacturers stole the headlines at Europe’s prestigious motor show in September with their wide range of affordable and modern EVs like the BYD Seal, the industry leaned on Brussels to protect it from what it views as China’s unfair advantages.
“No one can match BYD on price. Period,” warned Michael Dunne, CEO of car consultancy Dunne Insights. Speaking to the Financial Times, he said competitors in Europe, among others, are in a “state of shock.”
The boss of the continent’s bestselling car brand, Volkswagen, recently complained his carmaker was no longer competitive owing to its higher cost structure.
The EU is the second largest market for EVs after China, with 1.4 million vehicles sold through November, the latest month for which there is data.
Demand soared by 48% over the previous year’s period, prompting new EV leader BYD to announce plans late last month for its first-ever European manufacturing plant in Hungary.
Xi’s government did not react well to news of Europe’s investigation, calling it a “blatant act of protectionism,” according to state-owned media.
But targeting Germany’s car industry, by comparison, is difficult because the overwhelming bulk are built in China in joint ventures with local partners like FAW and SAIC.
It now appears as if China has found a lucrative export sector where it can retaliate with its own anti-dumping probe: European luxury goods.
Cognac producers confident trade spat can be resolved
France dominates China’s import of alcoholic beverages with its prestigious brandies leading the list.
Already back in 2009, cognac enjoyed the distinction of being the first foreign product whose geographical origin had been registered as protected in China.
Rémy Martin and Hennessy can sell bottles of extra old (“XO”) cognac for hundreds of dollars and above for more aged versions.