China-Australia Trade: Australian Wine Piles Up as China Shuns Imports

Australian wine exporters should be preparing for their peak selling season, the months preceding Christmas and New Year celebrations in China. They are instead watching stockpiles of product mount in warehouses as its biggest market clamps down on shipments from the country.

Already on edge after China announced two trade probes into the country’s wine industry earlier this year, people familiar with the situation said this month Beijing had also ordered traders to stop purchasing at least seven categories of Australian commodities -- including wine, rock lobsters, barley, and copper ore -- in its most sweeping trade move against Canberra yet.

The prospect of indefinite bans would be a worst case scenario for Australian exporters, who have already been hit this year by Covid-19 lockdowns.

The issue is keeping Alex Xu awake at night as he tries to keep his business afloat. The Sydney exporter sells his own brands of wine from vineyards located in South Australia’s Coonawarra, McLaren Vale and Barossa wine regions, as well as custom products. About 80% of its clients are in China.

Lately, his company Royal Star Wine has had six or seven orders from China canceled, resulting in a financial hit of A$200,000 ($146,000) to A$300,000. The importers had been recently ordered not to buy Australian wine, he said. By whom, it’s unclear.

“This is a very serious matter because we don’t know how long we’ll be banned,” Chinese-born Australian Xu said. “Every night I’m still thinking about ‘what should I do tomorrow?’”

The orders not canceled are being delayed at customs in China, Xu said. He currently has two containers, holding about 14,000 bottles of wine apiece, waiting on ships to clear customs in China. He’s been told they will be processed on Nov. 25 but isn’t confident that will happen, given reports of ongoing hold-ups from other exporters.

China hasn’t officially confirmed whether the bans are a government directive. Still, last week a spokesman for China’s Ministry of Foreign Affairs said Australia is to blame for worsening relations between the two nations, after Canberra called for an international investigation into the way China handled the coronavirus outbreak.

Still, the wine trade to China appears to have effectively stopped, according to Tony Battaglene, chief executive of industry group Australian Grape and Wine. Product set for export is down by as much as 60% and shipments that do reach customs in the country face intense scrutiny.

About 40% of Australian wine exports would typically be shipped in the final four months of the year, he said. “This is the peak export period,” Battaglene said. It’s “not good at all.”

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