China on Monday formally launched an investigation into whether the European Union is subsidizing and dumping wine in the Chinese market, potentially increasing its leverage in a dispute with the EU over solar panel imports.
The Chinese government had initially targeted the European wines favored by its growing middle class hours after the European Commission, the EU's executive body, levied in June punitive tariffs on Chinese solar panels.
The EU accuses Chinese manufacturers of dumping billions of euros worth of panels at below-production cost, and has warned the duties would rise further unless a negotiated solution was reached by early August.
China's Commerce Ministry announced it was starting its investigation based on a complaint by domestic wine producers.
“China's investigation department will strictly abide by China's relevant laws and regulations and meet the demands of relevant World Trade Organization rules,'' an unnamed official said in a statement on the ministry's website.
“In the investigation process, the Ministry of Commerce will follow the principles of openness, fairness and transparency, fully respect all parties' legal rights, and make a fair ruling based on objective fact and the relevant laws and regulations.''
European officials have suggested China was targeting European wine in retaliation for the row over the solar industry.
EU Trade Commissioner Karel De Gucht, in China last month for talks, said he hoped any agreement on solar panels would help resolve the wine dispute. EU officials deny the dumping of wine in China or subsidizing exports.
China's newly well-to-do, whose ranks are growing as fast as the economy, have a seemingly unquenchable thirst for European wines, especially those from France. China is now the biggest importer of Bordeaux wines, whose consumption soared 110 percent in 2011 alone.
Trade disputes between China and Europe have multiplied as commercial ties have grown.
The EU recently launched an investigation into alleged dumping by Chinese producers of stone used for counter tops and tiles and has also told Beijing that it is prepared to launch an investigation into anti-competitive behavior by Chinese producers of mobile telecoms equipment.
In June, the EU levied tariffs on Chinese solar panels at 11.8 percent for two months, but warned that duties averaging 47 percent would be implemented after that period if a negotiated agreement could not be reached.
The European Union is China's most important trading partner, while for the EU, China is second only to the United States. Chinese exports of goods to the 27-member bloc totaled 290 billion euros ($376 billion) last year, while European exports to China were 144 billion euros.