High-end liquor firms see drop in prices

The central government's recent curb on extravagant consumption among officials has caused a decline in both prices and sales of high-end liquor in China, an industry association official said Wednesday.

However, analysts pointed out that spending by the general public, instead of by government officials, should be the major driving force for growth of domestic public consumption,

Yang Chenggang, vice chairman of the China National Association for Liquor and Spirits Circulation was quoted by chinanews.com as saying that China's high-end liquor sector is experiencing the biggest decline in almost 10 years, due to the government's recent moves to encourage more frugal practices.

Since top leader Xi Jinping pledged to reject extravagance among Party members at a meeting of the Political Bureau of the CPC Central Committee in December, prices of high-end liquors such as Kweichow Moutai and Wuliangye have dropped sharply, as government officials have traditionally contributed to a significant amount of high-end liquor consumption.

"Wholesale prices of the 53-degree Flying Moutai have dropped to around 960 yuan ($154.46) from more than 1,400 yuan in January," said a liquor trader surnamed Wang at Beijing-based Qifeng Liquor Trading Co.

Wholesale prices of Wuliangye have also dropped by some 300 yuan to around 660 yuan from two months ago, Wang said.

Yang from the industry association said that with the government's curbing policy, sales of middle-range liquors may get a boost this year.

"At present, sales of liquor priced between 100 and 300 yuan have not been affected too much. However, as high-end products further lower their prices, the profits of middle-range and low-end liquors will be squeezed due to the increasing competition from high-end products," said Liu Hui, an industry analyst at Capital Securities.

Wang mainly sells liquor products to supermarkets and restaurants, and she said that sales to upscale restaurants had also been affected.

Beijing Xiang'eqing Group, a high-end restaurant chain operator, has stopped offering pricey dishes after the government's new curbs, according to recent media reports.

Data from the National Bureau of Statistics showed that in the first two months this year, retail sales in China increased by 12.3 percent year-on-year to 3.78 trillion yuan, but the growth was 2 percentage points lower than in the same period of 2012.

"Excessive official spending should of course be curbed. Spending by the general public, instead of spending from government officials should be the major driving force for domestic public consumption, and it is unhealthy that official spending plays such an important role in stimulating domestic consumption," said Wang Xianqing, a professor at Guangdong University of Business Studies.

Liu from Capital Securities said that the influence of the government's curbs on extravagant consumption will be reflected in liquor producers' financial data in 2013.