In 2016 I moved to Australia, and when I arrived at the airport in Sydney, I still remember thinking that I must have hopped on the plane, and now I was in the wrong country. I’ve always had in my mind that all Australians were blond, with blue eyes and white skin - just like the English. I never imagined the diversity of cultures I was about to get to know, including one which I’ve ended up getting to know very well, because you cannot work in the Australian wine industry, without learning something about the Chinese culture.
To all the Chinese customers and friends who have passed through, or are still in, my life, thank you very much for sharing your culture with me, and teaching me some of your language. “Xièxiè” - Thank you
Working in the wine industry in Australia, I soon realized that China is an important market for Australia, not only in wine, but also in the export of other products, and education - a large number of university students studying in Australia are Chinese.
According to statista.com, in an article called ‘Number of Chinese students in Australia from 2010 to 2019, by education sector’ published by Thomas Hinton on July 28, 2020, “There were more than 260,000 Chinese students enrolled in Australia in 2019, with approximately 160,000 enrolled in the higher education sector alone”.
Since the beginning of this year, the relationship between the Australian and Chinese governments has been the cause of several newspaper and magazine articles. In the wine market, this disagreement between China and Australia, is having a huge impact, and could not have come at a worse time - 2020 has been a year of many challenges for the country.
We started the year with fires, which caused massive financial damage to many wine producers, then the restrictions of Covid-19, starting in the middle of the harvest, and to close with a flourish, the Chinese government launched an investigation into Australian wines that are exported to the country.
The CADA (China Alcoholic Drinks Association), requested the MOFCOM - Ministry of Commerce People's Republic of China - launch an Anti-Dumping investigation. This investigation began on August 18, 2020 and is expected to end in August 2021, but can be extended by another 6 months. Recently, on 27 November 2020, MOFCOM announced that the Chinese government would impose temporary ‘Anti-Dumping Security Deposits’ with rates between 107.1% and 212.1% on Australian wines, before finalizing anti-dumping investigations.
But what is an Anti-Dumping investigation?
Dumping is a process, in which a company exports a product, at a significantly lower price, than the price it normally charges in its domestic market. An anti-dumping duty is a protectionist tariff that a domestic government imposes on imported products. Goods in which, the government believes, prices are below a fair market value.
China is accusing Australia of selling very cheap wines to the country, and that this is hurting their domestic market. The Chinese industry body says that in the past four years, the market share of Chinese wine has dropped from around 75% to just under 50%, and that this is because the sale of Australian wine is being poured out (wines sold at low prices) to China. That is why it imposed an import deposit scheme (tariffs), ranging from 107.1% to 212.1% on Australian wines.
According to Wine Australia:
"We are sure, that Australian wine is not being dumped on the Chinese market, and that our winegrowers and producers do not benefit from any subsidies"
The curious thing is that the Chinese market is the most important market for Australia for "value" - that is, China has been the best market for the sales of Premium Wines in the country. Last year, Australian wine exports to China were valued at $1.26 billion Australian dollars. In addition, Australia exports about 60% of its total production and about 39% of that has China as its destination.
Australia's wine sector is fully collaborating with the investigations. The government recognizes that export growth is necessary to maintain jobs and prosperity in the Australian market.
Tony Battaglene, Chief Executive of Australian Grape & Wine, thinks this is a good wake-up call for Australia to develop export opportunities in other markets, and not be so reliant on China.
Australia needs to make a decision, as soon as possible, to protect the sector from being hit by “supply and demand”, which with nowhere for our wine to go, would drive down prices in the domestic market and have a major impact on the economy. Maybe a good plan B for Australia, is to take Mr Battaglene’s advice and look beyond different oceans… maybe towards South America..?