China's wine industry lobby has complained Australia offered different subsidy programs that give its wines an advantage over Chinese products, the commerce ministry said in a statement.
He denied that government programs aimed at bolstering the wine industry counted as subsidies for exporters.
The new probe comes almost two weeks after the ministry said it was launching an anti-dumping investigation into Australian wine imports, alleging that winemakers have sharply cut the price of the products they were selling in China, subsequently damaging China's domestic wine industry.
The probe is yet another sign that the relationship between the two countries is deteriorating. 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".
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.
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. In addition, the Chinese ambassador to Canberra said in April that Chinese consumers might choose to boycott the nation's exports because of strained relations, a comment that was seen as a threat in Australia. Over 60% of the total Aussie wine production is exported to Australia.
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China is the top market for Australian wine exports and is also Australia's largest trading partner, with two-way trade worth A$235 billion ($170 billion) past year.
The investigation is the latest blow to the Australian industry, which has been hit by slower demand amid global Covid-19 lockdowns, drought-affected vintages, as well as smoke taint and damage from the country's unprecedented bushfire season last summer.
Canberra is now pushing back again.
Australia's trade minister, Simon Birmingham, previously called the investigation "very disappointing and perplexing" and said China was also considering a request to investigate countervailing duties, an import tax imposed to prevent dumping or counter export subsidies.
The government will now work with winemakers "to mount the strongest possible case against these claims", he added.
The investigation will be on "wines in containers holding 2 litres or less", and should be completed within a year or be extended to end-February 2022 under special circumstances.