China has launched an anti-dumping investigation into Australian wine exports, as trade tensions between Beijing and Canberra continue to escalate.

Wine is the third Australian industry to be hit by China in 2020, with beef and barley exports already facing trade sanctions.

China’s government has also warned tourists and students not to travel to Australia as the relationship between the two countries sours.

China’s Ministry of Commerce announced the investigation on Tuesday morning.

The ministry said it would look at whether Australian winemakers “dumped” bottles of wine at deliberately low prices to crowd out local producers and claim a bigger market share.

The move has already sent tremors through the industry.

In 2019, Australian wine exports to China were valued at $1.25 billion, more than a third of the whole export market.

Shares in Treasury Wine Estates were already in a trading halt after plunging almost 15 per cent on Tuesday morning.

Fears of ‘catastrophic’ impact on wine industry

In a statement, Treasury Wine Estates said it “would co-operate with any requests for information from Chinese and Australian authorities”.

“TWE has had a long and respectful relationship with China over many years through its team, partners, customers and consumers,” the statement said.

Trade Minister Simon Birmingham said Chinese authorities also warned Australia they may launch a second investigation into whether the Australian wine exports were benefitting from government subsidies.

“This is a very disappointing and perplexing development,” Senator Birmingham said.

“Australian wine is highly sought after in China because of its quality. Australian wine is not sold at below-market prices and exports are not subsidised.”

Australian Grape and Wine chief executive Tony Battaglene said he was “surprised” by China’s announcement onTuesday, and suggested the Ministry of Commerce had made the move to help local producers.

“We thought this had all calmed down, but we do know the Chinese industry that made the complaint has been struggling in a COVID world,” Mr Battaglene said.

“We’ll now be issued with questionnaires from the Chinese authorities directed at any companies they’ve identified as potentially dumping … China will then use that to investigate, one, if dumping has occurred and, secondly, if any damage to their industry has occurred.”

Mr Battaglene said the industry expected the investigation to conclude in August next year.

The move is likely to arouse renewed suspicions in Canberra that China is using its economic heft to punish Australia.

The bilateral relationship has been battered by a series of disputes.

The federal government angered Beijing when it decided to lock the Chinese telco Huawei out of Australia’s 5G network, while Australia has been deeply frustrated by intensifying cyber attacks emanating from China.

China has already imposed trade sanctions on Australian barley and beef. Photo: ABC

The Australian government has also repeatedly criticised Beijing’s militarisation of the South China Sea and its crackdown on Hong Kong.

China has denied that its move to impose tariffs on Australian barley and suspend imports from some Australian abattoirs are linked to broader political tensions.

But earlier this year China’s ambassador to Australia, Cheng Jingye, warned that Chinese consumers might boycott Australian goods because of Canberra’s push for an independent inquiry into the coronavirus outbreak.

Jeffrey Wilson from the Perth USAsia Centre said a clear pattern of economic coercion was now emerging.

“China’s probe against Australian wine follows the same logic as recent moves against barley – the use of seemingly ‘technical’ trade measures to disguise what is fundamentally a political sanction,” he said.

“The Chinese ambassador to Australia publicly threatened such sanctions on wine in April, making it an extreme stretch of credulity to believe this is a routine trade policy investigation.”

Dr Wilson also warned that the wine industry would be badly hurt if the Chinese Ministry of Commerce concluded it had been dumping, and imposed trade sanctions.

“With China buying just over a third of Australia’s wine exports – the largest market by a wide margin – the effects of any duties would be potentially catastrophic for this large regional employer,” Dr Wilson said.

-ABC