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China abolishes tariffs on Australian wine
Wine producers down under are breathing a sigh of relief today following the announcement that China’s Ministry of Commerce (MOFCOM) has scrapped the punitive tariffs on Australian wine after a three-year battle.
The abolition of tariffs, in keeping with the MOFCOM’s interim decision of 12 March 2024, comes into effect from tomorrow (29 March 2024).
Prior to their imposition, which came into force in 2020, mainland China was Australian wine’s most valuable export market.
Australian exports to mainland China peaked at AU$1.3 billion in the 12 months to October 2020. The volume of wine exported into China during this period was 121 million litres.
Tariffs have had a grave impact on wine exports to the market. In the 12 months to December 2023 they had fallen to AU$10.1 million, a difference of almost AU$1,290 billion in value. Volume plummeted by 119.6 million litres to 1.4 million in the same period.
The number of exporters to the market has also decreased from 2,198 to 117 over the same period, according to Wine Australia.
The organisation’s CEO Dr Martin Cole welcomed the news, saying that Mainland China remains an important market for Australian wine. “Over many years, Australian wine companies have developed close relationships with importers, buyers and consumers of Australian wine in China and these relationships remain important to our wine community. Pleasingly, we know that trade and consumer sentiment for Australian wine in China remains positive.”
However, he warned that the Chinese wine market is different now to what it was at the end of 2020, at the peak of Australia’s success in the region. He said that Wine Australia would “support the Australian wine sector to re-enter the market through a coordinated set of activities and advice on market requirements”, but noted that the organisation will be “continuing our market diversification efforts in other markets”.
Comments from trade bodies suggest that Australia’s wine sector is hesitant to rely as heavily on the Chinese wine market as was previously the case.
Australian Grape & Wine (AGW) chief executive Lee McLean also welcomed the news, but said AGW would “be maintaining our focus on diversifying our export footprint and growing demand here in Australia as well”.
According to official import statistics from Trade Data Monitor, total wine imports to China have fallen from 688 million litres in 2018 to 248 million litres in 2023 – a third of what it was five years ago. (Source: Trade Data Monitor)
The top four countries for wine imports to mainland China of France, Chile, Italy and Spain all recorded significant declines in their exports to mainland China in the 12 months ended December 2023. In 2023, the volume of wine imports from France fell by 29 per cent, Chile by 18 per cent, Italy by 31 per cent, and Spain by 48 per cent. (Source: Trade Data Monitor).
Trade response
Penfolds owner Treasury Wine Estates (TWE) has said in response to the announcement that it will begin to expand its premium and luxury Australian wine distribution in China as well as increasing investment in local sales and marketing.
CEO Tim Ford said the announcement “signals the start of our ramp up to re-establish our Australian luxury and premium wine distribution in China”.
“We’re excited to bring more of our Australian luxury and premium wines back to the China market,” he said, but noted that TWE is “mindful it will take time to sustainably regrow both supply and demand”. The company also aims to maintain its growth in other global markets where Penfolds has increased business in recent years.
Australian producers aren’t the only ones celebrating the news. Trade show organiser Vinexposium is gearing up for its 2024 Hong Kong exhibition set to take place in May. Company CEO Rodolphe Lameyse told the drinks business this morning that “Australian wines are poised to capitalise on Vinexpo Asia as an opportunity to reintroduce themselves to the market.
He said: “With two months remaining until the show, the timing is ideal for preparing for this revitalised platform, which will unite key players in the sector. This announcement sends a strong positive signal for the industry, signifying the resurgence of opportunities in the Chinese market.
“This development also bodes well for Vinexpo Asia, as it will draw increased interest from Chinese buyers eager to engage with the numerous Australian producers showcasing at the event.”
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