China targets Australian wine again as trade tensions escalate

Hong Kong/Sydney(CNN Business) Regulators in China have placed another hurdle in front of Australian winemakers as tensions continue to heat up between the two countries.

China's Ministry of Commerce announced on Monday it has launched an anti-subsidy investigation of some wine imports from Australia following a complaint from the China Wine Industry Association. The ministry said it will investigate 40 allegations of unfair government subsidies in the Australian wine sector.

The probe is yet another sign that the relationship between the two countries is deteriorating.

Australia has upset China by calling for a investigation into the origins of the coronavirus pandemic. Beijing later targeted it over trade, namely by suspending some imports of beef and slapping heavy tariffs on barley. Last week, Australia effectively blocked the sale of a dairy business to a Chinese company when Treasurer Josh Frydenberg said the acquisition "would be contrary to the national interest."

Also last week, China's second most senior diplomat in Australia made a speech in Canberra, likening Australia's push for the coronavirus inquiry to Brutus betraying Julius Caesar.

"All of a sudden, they heard this shocking news of a proposal coming from Australia, which is supposed to be a good friend of China," said Wang Xining, deputy head of mission at the Chinese embassy in Australia. "It is approximately identical to Julius Caesar in his final day when he saw Brutus approaching him. 'Et tu, Brute?'"

Wine became a target earlier this month when China's Ministry of Commerce said it would investigate whether Australia was dumping the product into the Chinese market. The Australian government dismissed those accusations, saying at the time that "Australian wine is by no means subsidized and by no means sold at or below market rates in the world market."

Australia is the biggest exporter of wine to China by value, according to Wine Australia, a trade organization backed by the country's government. In the most recent financial year, which ended September 2019, the country exported 1.13 billion Australian dollars (about $831 million) worth of wine to China, the group said.

Canberra is now pushing back again. In response to the latest probe on Monday, Australian Federal Trade Minister Simon Birmingham said in a statement that the government rejected allegations that "programs that support research and development equate to a subsidy of our wine exports."

The government will now work with winemakers "to mount the strongest possible case against these claims," he added.

The subsidies investigation will take at least a year, focusing on imported wines of less than two liters each, according to the Chinese Ministry of Commerce.

— CNN's Beijing bureau contributed to this report.