The ‘Moutai barometer’: Chinese economy feels sting of booze ban targeting elite

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In Renhuai city, home of China’s famous firewater liquor Moutai, the once-raging alcohol industry is in the grips of an economic hangover. Sales people are leaving in droves and small distilleries have gone bust, locals say, following a government booze ban that has targeted China’s elite.

Chinese officials and businessmen who love to banquet have stopped raising their glasses of Moutai after the government imposed an alcohol ban as part of an anti-corruption drive that directed them to live frugally on the public dime.

But the edict has ushered in austere times for a food and beverage sector already struggling with an economic downturn. It has also hobbled the government’s own efforts to get people to spend more to boost the economy, and has helped drag down the price of Moutai.

A giant sculpture of a Kweichow Moutai bottle near the Yanjin River in Maotai Town, Renhuai City.

Officially known as Kweichow Moutai, after the top distillery that manufactures it, the liquor is the premium version of the throat-stripping, sorghum-based spirit called baijiu and is renowned for its 53 per cent alcohol potency.

It is a mainstay of Chinese banquet culture and the drink and gift of choice in elite business circles, which has cemented it as an unofficial barometer of both consumer confidence and corruption.

At its 2023 peak, a bottle of Kweichow Moutai’s signature Flying Fairy would cost as much as 3300 yuan ($700), but it had now dropped below 2000 yuan ($428), said Mrs Tan, the manager of a Renhuai liquor pawnshop that trades in high-end spirits.

Workers prepare sorghum for fermentation at a distillery in Maotai Town, in Renhuai City.

“When even Moutai is difficult to sell and the price has dropped, it’s really difficult for us. So many people have left. Many small liquor companies here are dead now,” she said. “In the past, some businesspeople used to buy 10 to 20 boxes a month from us, but now it’s more like less than two boxes for two months.”

Last month, Kweichow Moutai also recorded a revenue growth of less than 9 per cent, its slowest in a decade.

In May, the government issued updated guidance banning party officials and civil servants from consuming alcohol, gourmet dishes and cigarettes at official meals and urged them to “take the lead in living a frugal life”.

State media also highlighted the case of a party official who died from alcohol poisoning in March after attending a banquet during a training seminar, where five officials drank five bottles of baijiu between them. It led to nine officials being disciplined or dismissed.

Kweichow Moutai and Australian Wagyu steaks are paired together at a restaurant in Beijing.

As local authorities clamoured to comply with the new anti-extravagance edict, concerns began emerging about the overzealous interpretation of the rules and how they should be enforced on China’s 40 million-strong public sector workforce.

After reports of a bank manager being fined 3000 yuan for having noodles that cost six yuan a bowl with two clients, official party publications began admonishing the strict enforcement, signalling an order from the Chinese leadership to pull back.

The “scalpel” had become a “sledgehammer” where “every dining party is scrutinised, every banquet is interfered with ... leaving ordinary party members and cadres dreading meals,” a commentary in the People’s Daily Online warned, slamming the vigilance as “lazy governance” that was damaging businesses and people’s livelihoods.

Nonetheless, the pinch is still being felt by those in the hospitality sector and associated industries.

Mr Feng, a manager of a Moutai distillery in Renhuai city, said the number of distilleries in the area had shrunk to about 1000 from 3000 in 2021 due in part to a misunderstanding of the alcohol ban.

“Some people simplified the concept and expanded its application. Some banned two civil servants dining at the same table. Then, what if both husband and wife are public servants? Can’t they dine together?”

Cheng Wenying, the owner of a small grocery store in Renhuai, said she too had been affected.

“The impact [of the ban] is huge. It is very difficult to do business now because less people do shopping. I can’t even afford the rental now,” she said.

The crackdown on lavish spending and banquet culture among party cadres has also made it harder for the Chinese government to boost public consumption – its No.1 goal as it tries to resurrect the economy from a deflationary spiral triggered by a years-long property market collapse and exacerbated by the trade war with the United States.

Chinese consumers have the equivalent of about $32 trillion in bank savings, a massive amount of spending power, but with most household wealth tied up in a stagnant or backsliding property market, they are reluctant spenders.

Economic data released last week by China’s National Bureau of Statistics, painted a gloomy picture of the challenge the government faces. Retail sales for August rose just 3.4 per cent from a year earlier while production at factories slowed to 5.2 per cent, marking a growth slump for both measures since July.

Youth unemployment also jumped to 18.9 per cent, its highest level since 2023, when the statistics bureau revised how it calculated the measure, and houses prices slipped again in August.

“Deflation is absolutely what China wants to avoid,” Greater China chief economist at ANZ bank Raymond Yeung said, adding that stabilising the property market was key to recovery.

“If I expect the price will drop tomorrow, should I spend money today? No. That’s why deflation is a major threat to consumption appetite.”

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