Nation & World

China’s latest anti-graft crusade gives liquor industry a hangover

The snapshots were once commonplace: Chinese generals hoisting glasses of booze at lavish banquets that few of China’s 1.3 billion people could imagine attending.

The elite official banquets haven’t disappeared, but they’re fewer in number, far less visible and reportedly much more sober. To shore up the legitimacy of his Communist Party, Chinese leader Xi Jinping has enacted a government austerity campaign. It appears to be paying dividends for Xi, but not for those who have a financial interest in China’s national liquor, moutai.

Moutai is a high-end form of baijiu, a sorghum-based spirit of various “fragrances” that’s dreaded by many Western visitors but beloved by Chinese men. Government banquets and business lunches once were known to feature several rounds of moutai, lubricating the proceedings and driving up the price of the country’s top brand, Kweizhou Moutai.

That price has come crashing down. The retail price for a bottle of Kweizhou Moutai fell from 1,980 yuan ($330) in 2011 to $1,200 yuan ($200) last year, said Li Mingyan, a sales manager for the company in Beijing. That’s forced the company to expand its customer base outside the public sector.

“Before we sold mostly to the party, the government and the military,” he said in an interview. “Now we have shifted to focus on private parties and wealthy people.”

The situation is even tougher for small- and medium-sized liquor producers in southern China’s Guizhou province, the nation’s epicenter of baijiu production (Kweizhou is how the province was spelled previously). According to a recent story in the newspaper Southern Metropolis Daily, up to half of the area’s liquor producers have closed because of the government’s austerity campaign and a slight slowdown in the Chinese economy.

How quickly fortunes can change. As recently as 2011, the net profit of Kweizhou Moutai grew by more than 73 percent over the previous year. A survey of Chinese millionaires ranked Kweizhou Moutai fifth among favored luxury brands, trailing only Louis Vuitton, Cartier, Hermes and Chanel. All this brought gallons of gifts to government officials and wealth to the mountain mecca of Maotai, a Guizhuo province town that, after the revolution, changed its name to honor Chairman Mao Zedong.

Yet Xi’s austerity campaign against “tigers” and “flies” – top officials and low-level bureaucrats – has sent tremors through some industries. In December, the stock price of Kweizhou Moutai slid so quickly that the government suspended trading. According to a recent report in China Daily, a state newspaper, “The inventories of 14 listed enterprises involved in the white spirits industry surged 23.6 percent to 35.6 billion yuan in the third quarter of last year, while revenue fell 12.25 percent to 5.72 billion yuan.”

Many other industries in China are feeling the effects of reduced government opulence. Hotels, conference facilities and luxury retail outlets have all seen a drop in business. In an attempt to set a personal example, Xi paid a visit in December to the Qing-Feng Dumpling Shop in west Beijing, where a photograph of him enjoying a simple meal quickly went viral.

Despite such stunts, few China watchers are convinced that Xi and his comrades are serious about stamping out graft involving public officials.

“There are all kinds of ways to launder money through gift giving,” said Karl Gerth, a history professor at the University of California, San Diego, who specializes in Chinese consumption patterns. While the baijiu and hotel industries may suffer, he said, those who need government help will find new ways to curry favor with public officials.

China, Gerth noted, has a long history of bureaucrats being underpaid and leaders trying to keep them honest. Emperor Zhu Yuanzhang, the founder of the Ming Dynasty, launched an anti-corruption campaign that won over the masses in the 14th century but didn’t have a lasting impact on the imperial court.

Here in Beijing, hardly a day passes without new reports of authorities investigating a high-level official for bribery or worse. On Thursday, the government’s anti-graft agency reported that Ji Wenlin, the vice governor of Hainan province, was under investigation for suspected “severe violations of discipline,” according to state media.

Last year, 17 officials at his level were the focus of similar investigations. In January, prosecutors nationwide handled 3,423 cases of graft and bribery, an 11.6 increase over the same month last year, according to court figures reported by China Daily.

While skeptical that the anti-graft campaign will amount to much, some Western observers are thankful that it might result in less baijiu being poured. Western distaste for the liquor dates to at least 1838, when Dr. C. Toogood Downing of the British Royal College of Surgeons wrote in depth about the ill effects of baijiu, calling it “poison to the human frame.”

Derek Sandhaus, a Beijing writer who keeps a baijiu blog – “300 shots of greatness” – notes that there once was a British admiral who issued strict orders to sailors in China not to indulge in baijiu. “The ban was unsuccessful,” Sandhaus wrote, “perhaps because nobody could think of a punishment worse than being forced to remain sober in Asia.”