The Chinese government may be trying to protect Guizhou Moutai, a state-run premium liquor group whose bottles of baijiu can fetch high prices at auction. CFOTO/Future Publishing/Getty Images
Xi Jinping has launched retaliatory trade investigations targeting high-end liquor makers that compete with China’s most valuable state-owned enterprises, increasing economic tensions with Europe.
The Chinese government’s announcement to investigate price dumping among EU brandy vendors comes about three months after Brussels launched an investigation into Chinese low-cost electric car makers, including BYD. BYD snatched the sales crown from former leader Tesla for the first time in the fourth quarter.
“This investigation is being carried out in the context of trade agreements between the European Union and China regarding other industrial sectors, which are unrelated to our activities,” French cognac producer lobby group BNIC told the trade publication. Told. global drink intel on friday.
After the Chinese EV maker made headlines at Europe’s prestigious motor show in September with its wide range of affordable, modern EVs bearing the BYD seal, the industry saw what the industry saw as an unfair advantage for China. They turned to Brussels to protect themselves from what was to come.
“Nothing can match BYD on price. It’s outdated,” warned Michael Dunn, CEO of automotive consultancy Dunn Insights. When you talk to Financial Times, He said competitors, especially in Europe, were in a “state of shock”.
The president of Volkswagen, the continent’s best-selling car brand, recently complained that his automaker’s high cost structure has made it uncompetitive.
The EU is the second-largest EV market after China, with 1.4 million cars sold through November, the latest month for which data is available.
Demand soared 48% year-on-year, and new EV leader BYD late last month announced plans to build Europe’s first manufacturing plant in Hungary.
State media said the Xi administration did not react well to the European investigation, calling it a “blatant act of protectionism.”
However, by comparison, targeting the German auto industry is difficult. That’s because the overwhelming majority of vehicles are produced in China in joint ventures with local partners such as FAW and SAIC.
China now appears to have found a lucrative export area in which it can retaliate with its own anti-dumping investigations: European luxury goods.
Cognac producers confident trade dispute can be resolved
France has a monopoly on China’s alcoholic beverage imports, with its famous brandy leading the list.
Already in 2009, Cognac enjoyed the honor of being the first foreign product whose geographical origin was registered as protected in China.
Rémy Martin and Hennessy can sell bottles of extra old (“XO”) cognac for hundreds of dollars or more for more aged versions.
This puts it in the same price category as spirits produced by government-controlled Guizhou Moutai, the country’s second-largest company by market capitalization.
Its main product is a brand of colorless and transparent “baijiu”. baijiuFormer leader Zhou Enlai recommended this dish to Richard Nixon during his visit to Beijing in 1972, and it has become a staple at Communist Party banquets.
National Security Adviser Henry Kissinger famously said that any conflict could be resolved by consuming enough Mutai, which has a light alcohol content of over 100 proof.
The rise of this spirit is closely intertwined with that of Communist China and Chairman Mao Zedong.
Drinking Maotai’s baijiu is said to have helped him defeat rival Chiang Kai-shek’s Kuomintang forces and reverse the tide of the battle at Chishui River, which was fought not far from the distillery.
Although produced primarily for local farmers at the time, its agrarian image and association with Mao Zedong’s victory quickly made Moutai-style baijiu the alcohol of choice for party officials. Proven.
Since then, it has become a valuable status symbol among the country’s elite and a very popular gift when concluding business deals.
Christie’s auction house explains that Moutai’s flavor is due to the micronutrients contained in the water from the Chishui River, and recommends drinking it in a tulip-shaped brandy glass to concentrate the aroma without heating it in the palm of your hand.
Like fine brandy imported from the Cognac region of France, baijiu is only allowed to be produced in Moutai town in Guizhou province (formerly romanized as “Kweichow”, hence the name). Therefore, it may be traded at exorbitant prices.
It’s also popular with collectors and investors alike, as it can appreciate its value and might otherwise pick up a bottle of fine French brandy.
French cognac producers, some of which are owned by major European brand groups such as LVMH, Remy Cointreau and Pernod Ricard, said they would fully comply with the Chinese government’s investigation.
“Our products and business practices are fully compliant with Chinese and international regulations, and we are confident that the European Union and China will find a constructive way to resolve the bilateral dispute,” BNIC said. . global drink intel.