China's Retaliatory Measures Intensify with French Brandy in the Crosshairs
China retaliates against the European Union's probe into cheap Chinese electric cars by launching an investigation into the price of French brandy imports, escalating the trade dispute between the two economies
China has initiated an investigation into the pricing of European Union imported brandy, which is believed to be a response to the EU's investigation into the influx of inexpensive Chinese electric cars in Europe. The Chinese Ministry of Commerce announced on Friday that they had initiated an anti-dumping investigation based on the request of domestic liquor producers. Dumping, in this context, involves exporting goods to a country at prices that do not accurately reflect their actual cost.
European brandy producers consider China to be a crucial market, but shares of luxury consumer goods groups took a hit following news of the investigation. Director at Rhodium Group, Agatha Kratz, noted that most of the companies potentially impacted by the probe are French cognac brands.
"China has emerged as a major market for spirits and French spirit companies," she informed CNN. "In just a decade, China has become a crucial source of revenue and growth for them."
Stocks of Pernod Ricard saw a nearly 5% decrease in Paris. The company is the owner of Martell, a renowned cognac producer with a history dating back over 300 years. Rémy Cointreau's stocks plummeted by over 11%, and LVMH, owned by Bernard Arnault and the parent company of Hennessy cognac, fell by 2%.
Kratz believes that the retaliation against France was due to its strong support for the EU probe into China's suspected anti-competitive trade practices. In September, the European Commission announced an investigation into Beijing's potential use of significant state subsidies to artificially keep prices low for its electric vehicle exports.
"Global markets are now flooded with cheaper Chinese electric cars," European Commission President Ursula von der Leyen said in a speech. "This is distorting our market," she added.
