Dispute with the EU highlights growing trade friction, experts say

The government has been asked to investigate if European winemakers are being subsidized and dumping their produce in China, a move analysts said is Beijing's latest response to the European Union's rising trade protectionism against China.

The China Alcoholic Drinks Association asked the Ministry of Commerce to launch an investigation into wine imports from the EU, said Wang Zuming, secretary-general of the association's wine sub-branch, on Monday.

"We have noticed a clear intention to sell European wines in the Chinese market at below-cost price," Wang said.

"There is also sufficient evidence to show that the EU has heavily subsidized its wine industry and exporters."

Some analysts view the move as a series of responses to the EU's possible probe of China's solar panel exports.

European solar companies recently asked the European Commission, the executive arm of the EU, to probe Chinese exports to the EU. The commission will decide in September whether to launch the probe.

China's wine complaint came after its four major solar companies, including New York-listed LDK Solar Co, asked the government last week to start anti-dumping and anti-subsidy probes into polysilicon exports from the EU.

The EU produces about 16 million metric tons of wine a year and accounts for 69 percent of global output.

Wine imports from the EU to China in 2008 were 35.9 million liters, but the figure rose to 169 million liters in 2011, the association said.

European wine producers increased their share of the Chinese market to 14.32 percent last year, from 4.94 percent in 2008.

"Almost all of the domestic wine companies said their businesses have been hit hard," Wang said.

During the first quarter, wine imports from the EU, mainly from France, Spain and Italy, surged by 24 percent from a year earlier.

A source from the Ministry of Commerce told China Daily, on condition of anonymity, that the government will probably start an investigation "very soon”.

"China has the capacity to fight back if the EU launches an investigation into China's solar products,” Zhou Shijian, a senior trade expert at Tsinghua University, said.

"Such an investigation will do more harm than good to the EU,” he said, without elaborating.

The United States and the EU have been aggressive in launching trade probes into Chinese goods amid the global financial crisis but China is learning to fight back, Zhou said. "China is getting wiser and more mature in protecting its own commercial interests under the World Trade Organization framework.”

US solar power manufacturers, including SolarWorld USA, accused Chinese solar companies last year of selling panels in the US market at prices that were far below what US-made panels could be sold for. In May, the US announced anti-dumping duties on Chinese solar makers ranging from 31 percent to 250 percent.

China then announced it would launch an investigation into US polysilicon exports.

Conflicts grow

As the debt crisis worsens and unemployment rises, the EU is targeting Chinese exports, an analyst said.

Jonathan Holslag, research director at the Brussels Institute of Contemporary China Studies, said trade conflicts are "inevitable” but a spiral of retaliation is in no one's interests.

"It is time for China and the EU to sit down to hold candid and straightforward discussions on where we are and where we need to go,” Holslag said.

The EU joined the US and Japan in March to launch an appeal to the WTO against China's export policy on rare earths.

The European Commission said it was considering charging duties on made-in-China products to offset alleged subsidies.

The commission believed that European companies were hesitant about asking Brussels to take protective measures for fear that China would retaliate against their business interests.

Reports in May said the European Commission also prepared a case against

China's telecom equipment companies including Huawei and ZTE Corp.

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Wang Zhuoqiong contributed to this story.