China: Liquor Sales Suggest Corruption Crackdown is Working

Published: 06 December 2012

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A drop in the share price of Moutai, the high-end liquor often used by political and business elites for bribes, is a likely indicator that investors may be taking seriously China’s promise to crack down on corruption, the Atlantic Media website Quartz reports.

Moutai is the country’s top luxury brand of baijiu (“white alcohol”), a popular grain liquor, and it can cost up to ¥1 million ($160,635) for a vintage bottle.  CBS anchor Dan Rather reportedly described it in the 1970s as tasting like “liquid razor blades.”

In 1989, Chinese Youth News called Moutai, an ”all-purpose grease” for bribing bureaucrats and party cadres. Past surveys have shown that only one in 100 Moutai drinkers bought the liquor themselves.

Historically, Chinese markets have reflected skepticism about government promises to root out graft. In March of this year, when outgoing premier Wen Jiabao vowed to stop government officials from spending extravagantly on high-end liquor, shares in the Moutai maker Kweichow Moutai fell only slightly.

Vice President Xi Jinping, who will become China’s head of state in March, appears to be more committed. He’s making good on anti-corruption rhetoric by banning red carpet treatment for Chinese officials as his first major policy move.

And this time the market is responding. Shares in Kweichow Moutai have fallen 20 percent since the mid-November Communist Party congress which anointed Xi as China’s new head.