China Rejects Australia's Outstretched Hand for Wine Trade

Australia Seeks Cooperation with China to Avoid Tariff Bombardment... China Lacks Competitive Business Model in Australia
China Must Change Its Mindset Towards China

[Asia Economy Beijing=Special Correspondent Jo Young-shin] As the Australian wine industry seeks survival strategies such as local production in China, the Chinese liquor industry has poured cold water on these efforts, citing a lack of competitiveness. After the Australian government joined the US in March last year demanding an international investigation into the origin of COVID-19, China’s Ministry of Commerce imposed retaliatory tariffs ranging from 116.2% to 218.4% on Australian wine in March.

China’s state-run Global Times reported on the 22nd that CEOs of major Australian wine companies recently visited China to explore cooperation plans with local Chinese companies.

Photo by Baidu Capture

With tariffs as high as 218.4%, Australian wine, which held the top market share in 2019, has been pushed out of the rankings. Chinese authorities claim that Australian wine has engaged in unfair competition by receiving subsidies from the Australian government and imposed tariffs exceeding 200% on Australian wine. As Australian wine lost price competitiveness, Chilean, French, Italian, and New Zealand wines have dominated the Chinese wine market. The tariff rate applied to French wine is reportedly around 40%.

The Global Times reported that CEOs of Australian wine companies, facing near expulsion from the Chinese market, recently visited the Ningxia Hui Autonomous Region in northwest China to seek cooperation plans. Ningxia is a region the Chinese government plans to develop into a wine-producing area comparable to Bordeaux in France.

The Global Times added that Australian company representatives also visited northeastern China and Qinghai to inspect production lines of local Chinese liquor companies and investigate local government support measures.

A source from the Chinese wine industry said, "The cooperation plan proposed by Australian wine companies is that Australia would handle technology and quality control, while Chinese companies would be responsible for raw materials (grapes) and production." This suggests a likely contract manufacturing model.

The Chinese liquor industry has expressed skepticism about Australia’s cooperation plan. Huo Xingsan, Secretary-General of the China Alcoholic Drinks Association (CADA), said, "Wines produced in China under the method proposed by Australian wine companies would bear Australian brand labels," adding, "It would be difficult to maintain the advantages of Australian products with this approach."

The Global Times quoted industry experts who said the business model envisioned by Australian wine companies lacks competitiveness and argued that Australian companies (and the Australian government) need to change their mindset toward China and approach the Chinese market more rationally.