* China frozen chicken imports worth more than $1 bln a year
* Brazil accounted for 85 percent of 2016 frozen chicken imports
* China's poultry industry recovering from bird flu crisis (Adds comment from lawyer, Brazil government)
By Josephine Mason and Ana Mano
BEIJING/SAO PAULO, Aug 18 (Reuters) - China has launched an anti-dumping investigation into imports of Brazilian broiler chicken in another blow for the South American country's meat industry and threatening over $1 billion of exports annually.
The investigation comes after a complaint from China's domestic industry that Brazil, its top supplier of chicken, has been selling its broilers below market value.
Any move to penalize imports would hurt Brazil's power house protein industry which has already been tarnished this year by a food safety scandal.
Brazil accounted for more than 50 percent of broiler product supplies to China, the world's No. 2 poultry consumer, between 2013 and 2016, China's Commerce Ministry said in a statement. It accounted for almost 85 percent of frozen chicken imports -- almost 600,000 tonnes valued at as much as $1.23 billion, according to Chinese customs data.
"The announcement of the investigation itself works like a barrier because the potential imposition of anti-dumping charges could constrain Chinese importers," said Vera Kanas, a lawyer specializing in foreign trade disputes.
"They will not want to close purchases knowing that charges may apply later," she added. Kanas said the investigation involves 27 Brazilian companies including BRF SA, JBS SA and several privately owned exporters.
The Chinese government should make a final decision in a year, but a preliminary ruling could be unveiled as early as April 2018, according to the case documents and Chinese law, Kanas said.
BRF declined to comment. JBS referred queries to ABPA, a group representing Brazilian chicken producers and exporters.
Brazil replaced the United States as China's top chicken supplier after Beijing slapped anti-dumping duties on U.S. broiler chicken products in 2010.
ABPA denied its members sell products below market prices.
"We are very competitive and it is hard for the Chinese producer to understand," ABPA President Francisco Turra said, reflecting on the surge of imports since the Chinese market opened to Brazilian poultry in 2009. "Such complaints are normal and we can defend ourselves."
The investigation comes just months after Beijing slapped hefty penalties on sugar imports from top growers such as Brazil and Thailand after lobbying by domestic mills.
Brazil's foreign ministry said the government would support chicken exporters involved in the investigation.
Shares of Brazil's BRF SA, the world's largest chicken exporter, initially fell on Friday but closed up 1.29 percent as the benchmark Bovespa stock index gained 1 percent. JBS shares ended down 2.04 percent.
China relies on imports for its supply of white feather broiler chickens, which are favored by fast-food chains like Yum Brands Inc's KFC and McDonald's Corp for their more rapid development and plumper meat. Yellow-feathered birds, which are native to China, are generally sold at retail.
In 2016, Brazil accounted for 85 percent of China's frozen chicken imports - almost 600,000 tonnes valued at as much as $1.23 billion, according to customs data.
The push for a probe comes as the poultry industry recovers from an outbreak of bird flu and struggles with falling demand.
"The chicken market has been not so good since the second half of last year. Brazil is selling a lot to China at a cheap price while China has ample supplies itself," said a chicken farmer in northern China who gave his surname as Tan.
Live broiler chicken prices in Shandong province, one of the nation's major producing areas, have more than doubled since February and were around 7.7 yuan ($1.15) per kg on Friday.
Any curb on foreign supplies would likely boost domestic prices further, potentially denting demand for chicken as a cheap alternative to pork, the nation's favorite meat.
Broiler chicken sells for 14 yuan ($2.10) per kg, according to government data, almost one-third less than pork and more than 70 percent cheaper than beef and lamb.
Reporting by Josephine Mason in Beijing and Ana Mano in São Paulo; Additional reporting by Hallie Gu in Beijing and Lisandra Paraguassu in Brasília; Editing by Jeffrey Benkoe and Lisa Shumaker