News that Australian wine exported to China was facing delays getting through Chinese customs caused some alarm recently, in both the trade and political spheres.
Treasury Wine Estates (TWE), one of the world's biggest winemakers, owns the Penfolds, Wolf Blass and Rosemount labels. Its China sales have been very healthy, increasing 60% in the second half of 2017. The report led to a temporary fall in the value of TWE shares.
TWE said they were asking Chinese authorities about unspecified “new and additional verification requirements”, introduced within the last month, “seemingly” applied only to Australian wine, according to the Australia China Business Review.
The news broke on Wednesday 16 May, the same day Australian Trade Minister Steve Ciobo was due to visit China to reinforce trade ties. Relations between China and Australia have been strained in recent months.
Chinese media and political authorities have expressed dismay over new Australian laws banning foreign political donations, and criticism of China's exert influence in the Pacific. China's Foreign Minister Wang Yi told Australian Foreign Minister Julie Bishop that Australia needs to remove its “tinted glasses” if it wanted to restore good relations.
China’s Global Times called Australia arrogant, and said it would make sense to cut wine and beef imports to teach the country a lesson.
China is Australia's largest trading partner, and the world's fifth largest wine consumer. Philip White, writing for In Daily, suggests Australian winemakers seem “cocky”, too confident that the very lucrative wine trade is an easy money spinner.
According to White, TWE boss Michael Clarke thought the current block was intended to pressure TWE in supplying higher quality wines rather than the cheaper varieties, which were the ones held up by customs. When Clarke told China that TWE was not prepared to do this, TWE stocks went up again.
This makes sense, because Chinese middle class consumers are the main market for higher value Australian wines, according to Austrade. Wine is perceived as being both sophisticated and healthy, and Chinese consumers have considerable brand awareness.
It should also be noted that wine imports to China have slowed down before, as in early 2017, simply because China was overstocked.