The decision by Treasury Wines Estates, one of the leading wine companies in Australia, to seek local production of its Penfolds brand in China is viewed in a cold light as bilateral ties remain frayed, Chinese analysts and industry insiders said on Monday.

Treasury Wines Estates chief executive officer Tim Ford said he is convinced that the company will eventually make Penfolds wine using Chinese grapes in a bid to rebuild sales in China, the Australian Financial Review reported.

China in March imposed anti-dumping measures that raised tariffs, with the maximum rate of 218.4 percent levied on Australian wines.

Such tariff-avoiding tactics by substituting trade with investment underline the attractiveness of the Chinese market to the Australian wine industry, Song Wei, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Monday. 

Because New Zealand is also highly substitutable, Australian wine merchants are hoping to stall the pace with which they are losing market share in China by such measures, Song said. 

However, in view of the special nature of wine production, such as the required raw materials, it is unrealistic for Australian wine companies to move their production chains to China on a large scale, and the idea should be treated with caution, Song noted. 

Industry insiders reached by the Global Times also highlighted their concerns, with some even flagging the danger of policy risks.

A Guangzhou-based wine trader surnamed Lin said he was aware that some Australian winemakers are coming to China to produce wine, in a bid to avoid high import tariffs imposed on their products while sustaining their share in China, their most promising market.

However, Lin said that it is not very advantageous for them to build production facilities in China, especially for high-end wine. "The production level of domestic wine is generally not high, while the production cost is relatively higher than the international level," Lin said.