Analysis-Ebbing demand for China's favourite firewater adds to debt concerns

By Casey Hall and Sophie Yu

MAOTAI, China (Reuters) - In the Chinese colony of Maotai, the section firewater named aft the municipality is not lone a cardinal root of income, it's a barometer of the country's battered user marketplace and the economical misfortunes of its location province.

In the weeks earlier Lunar New Year, tourists traditionally flock to the town, nestled successful the mountains of the southwestern state of Guizhou, to bargain the baijiu, oregon achromatic spirit, arsenic gifts - this year, those crowds were notably smaller.

The premium tone made locally by Kweichow Moutai has for decades been a fixture astatine weddings, concern dinners and authorities functions, but its income successful the past 2 years person been deed by mediocre user and concern confidence.

Victor Shih, a prof of governmental subject astatine the University of California San Diego, says Moutai's beardown currency flows person been "an important portion of the strategy to assistance Guizhou's authorities repay indebtedness that is perpetually coming due".

That means immoderate contraction successful Moutai's nett constitutes a occupation for the government, which "needs that wealth to repay their indebtedness and to tally the government," helium added.

Shanghai-listed Kweichow Moutai is majority-owned by Moutai Group, successful crook wholly owned by Guizhou, China's second-most indebted province.

Its publication to Guizhou's economical improvement is enormous, not lone arsenic a large leader but besides arsenic a conveyance for the state to rise gross and wage down debt.

Long considered a bellwether of Chinese user demand, its retail show has been squeezed successful caller years by wider deflationary pressures.

"Before, radical would alert from Beijing to bargain bottles of Moutai for much than 3,000 yuan ($412) respective times per year," said a shopkeeper astatine 1 of the galore liquor stores lining the stream successful Maotai village.

"Now you tin get a vessel for arsenic small arsenic 1,699 yuan, but the situation is truthful bad, no-one wants to buy."

Kweichow Moutai, the world's largest intoxicant institution and until past twelvemonth China's astir invaluable listed steadfast with a marketplace worth arsenic precocious arsenic $400 billion, makes its wide tone from sorghum and has a peculiar spot successful the nation's history.

Premier Zhou Enlai toasted U.S. president Richard Nixon with Moutai connected his landmark 1972 China visit.

But a persistent slump successful sentiment has taken the upwind retired of Kweichow Moutai's stock terms and the terms consumers are consenting to wage for the product.

The firm's worth has fallen by astir fractional since hitting a grounds precocious successful 2021, and the marketplace terms of a 500 ml vessel of its flagship 53% impervious Feitian "Flying Fairy" past twelvemonth dropped arsenic overmuch arsenic 22% from 2,700 yuan astatine the commencement of 2024.