Chinese President Xi Jinping’s recent state visit to France aroused keen interest among French luxury brands. Trade issues, including the situation of the French cognac market in China, were at the heart of exchanges between French and Chinese leaders.
Chinese President Xi Jinping’s state visit to France from May 5 to 7, marking the 60th anniversary of diplomatic relations between the two countries, was rich in discussions and concerns.
In particular, the leaders addressed trade issues, the war in Ukraine and the situation in the Middle East, human exchanges (scientific, cultural and sporting cooperation) and global challenges (climate emergency, protection of biodiversity). The fate of French spirits, and cognac in particular, was at the heart of the discussions.
Last September, the European Union launched an investigation into subsidies granted to electric vehicles manufactured in China and exported to the EU. In retaliation, French cognac found itself subject to an anti-dumping investigation initiated by the Chinese authorities in January 2024.
“This was a direct response to Europe’s questioning of China’s policy of subsidizing its electric car industry,” explains Vincent Barbat, Partner at Kearney (formerly AT Kearney), in charge of luxury goods for Europe.
The Chinese investigation could potentially lead to an increase in customs duties, threatening the crucial cognac market in China. French luxury brands, heavily dependent on this market, have been hoping for clarification during Xi Jinping’s visit.
No customs duties
At the end of their private meeting in Paris, the two leaders reportedly ruled out the possibility of imposing provisional customs duties pending the conclusions of the investigation. Emmanuel Macron spoke on Monday of his Chinese counterpart’s “wish” not to “see applied” the Chinese “provisional measures” targeting French cognac, after offering him bottles.
“I thank the President for his openness regarding the provisional measures on French cognac and his wish not to see them applied”, said the French head of state.
This threat had a paralyzing effect on cognac producers, notably Remy Cointreau, which was bearing the full brunt of the slowdown in the Chinese and American markets. French cognac and armagnac account for 95% of European spirits exports to China, raising serious concerns about a possible increase in customs duties as a result of this investigation. This procedure, which will continue until 2025, comes at a particularly difficult time, with cognac exports down 20% in 2023 after two record years. The cognac industry, which relies on China as its second-largest market, accounting for 20% of sales by volume, was hoping for a revival in this country.
Behind the scenes, the Bureau national interprofessionnel du cognac (BNIC) and all the cognac players mobilized and succeeded in meeting the Chinese Minister of Commerce at the beginning of April. On March 13, the Chinese Ministry of Commerce announced its intention to include the three largest cognac houses – Hennessy, Martell and Rémy Martin – in the procedure.
Beauty under pressure
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