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China has handed a reprieve to French cognac producers by deciding not to impose new tariffs despite an escalating series of trade disputes between Beijing and the EU.
Beijing in January launched an anti-dumping investigation into brandy from the bloc, after Brussels said it would investigate imports of Chinese electric vehicles.
China’s commerce ministry said in a preliminary decision on Thursday that it would not impose provisional anti-dumping measures, despite finding that dumping had taken place.
Shares in Pernod Ricard and Rémy Cointreau rose by double digits after the announcement.
The ministry said there was dumping that “poses a substantial threat to the domestic brandy industry, and there is a causal relationship between the dumping and the threat of substantial harm”. It did not explain its decision not to implement anti-dumping measures.
The EU and China have been at loggerheads over trade for months, with Brussels imposing higher EU tariffs on Chinese-made EVs after finding that Beijing was unfairly subsidising its car industry. The EU has also curbed Chinese investments.
Beijing, which has previously slammed the EU for rising protectionism and abuses of trade practices, has also launched anti-dumping investigations into European dairy and pork imports and has lodged a complaint over the EU tariffs with the World Trade Organization.
Beijing said the probe into cognac was sought by China’s domestic industry. But the investigation — and threat of tariffs in the country of 1.4bn people — had been viewed as a punishment for France after French car executives and officials supported the EV tariffs.
As Beijing’s trade ties with the west have frayed, some China trade experts have cautioned President Xi Jinping’s administration not to retaliate in ways that could further damage the slowing Chinese economy.
Separately on Thursday, Pernod Ricard, which owns Martell cognac, reported a drop of 1 per cent in full-year like-for-like sales as it faces challenging US and Chinese markets.
China has become the biggest market for Martell, the world’s second-largest cognac producer, after decades of investment in the country.
Pernod remained “prudent” on its China outlook despite the country’s provisional decision not to impose anti-dumping tariffs, chief executive Alexandre Ricard told investors on Thursday.
The company rejected the dumping allegations but was co-operating with Chinese authorities, Ricard said, noting that their probe would run until July 2025. “They could still decide to impose tariffs between now and then,” he said, adding Pernod was “disappointed for the moment”.
Shares in Pernod were later trading 5 per cent higher on the day while Rémy Cointreau stock was up 7 per cent.
Additional reporting by Wenjie Ding in Beijing and Arjun Neil Alim in Hong Kong
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