China may retaliate with wine duties in row on solar panels
China has announced that it has started an anti-dumping and anti-subsidy investigation of wine imports from the European Union after Brussels imposed tariffs on Chinese solar panels.
The EU announced tariffs as high as 68pc on solar panels from China, which will be implemented initially at a lower rate of 11.8pc.
China's Ministry of Commerce responded by saying the country "firmly" opposes the EU decision and in the same statement said that Chinese authorities had started the probe of wine imports.
Growing trade tensions between China and the EU puts at risk a relationship that generated $168bn of exports and imports in the first four months of this year, according to Chinese government statistics.
The dispute over solar panel shipments comes after economic growth in China slowed in the first quarter to 7.7pc and the euro-area economy reported a sixth quarter of recession.
"It's a signal," said Shen Jianguang, chief Asia economist at Mizuho Securities Asia. China had said in the past that "there will be consequences, so they have to back it up with action."
China's wine imports rose 8.9pc to 430 million litres in 2012, according to data from China's customs agency. The imports were valued at about $2.57bn, it said.
The EU region accounted for more than two-thirds of the imports, with France being the biggest export country, it said.
China may surpass the US to become the world's biggest wine market by 2023, according to estimates by Treasury Wine Estates, the world's second-largest wine company.
A commentary published by China's official Xinhua News Agency yesterday said the nation hopes the EU can show "good faith" in a new round of negotiations on the solar trade issue that may start soon.
The article also said the EU's decision to impose a temporary tariff of 11.8pc instead of 47.6pc showed the dispute could be solved through negotiation.
Chinese Commerce Ministry spokesman Shen Danyang, in its statement said trade was an important foundation for ties with the EU and that China doesn't want to see the solar dispute affect the broader relationship.
"Both sides understand the relationship is very important; having a trade dispute is quite normal when you have such a big trade flow," Mizuho's Shen said.
"It's more likely they will reach an agreement than a trade war."