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| The circulation price of Moutai plummeted |
Zhang Yongxiang:There is a kind of wine that, when served at a Chinese banquet, will make wine lovers smile and other attendees will also look at it with approval. This is the high-end liquor Maotai. A bottle basically costs more than 2,000 yuan, which can show the host’s enthusiasm for the banquet.
At present, something unusual has happened to Moutai, and the circulation price has dropped sharply.
The demand for Moutai exceeds the supply, and the circulation price has always been at a premium. Just like Japan’s Suntory whiskey “Yamazaki”. However, the main brand “Feitian” began to fall after reaching a peak of about 2,800 yuan in the fall of 2023, and fell to below 2,200 yuan in June 2024. It is still weak in rebounding. It is reported that some pawnshops even refuse to accept Moutai due to concerns about price fluctuations.
This is a doubly or triple bad situation for China. Needless to say, the decline in circulation prices reflects sluggish consumption. The decline in hospitality demand is due to sluggish corporate performance. Data from the National Bureau of Statistics showed that restaurant sales in June 2024 increased by 5% year-on-year. Before the outbreak of the new crown epidemic, the growth rate was generally around 10%.
The hot topic in China recently is Nanchengxiang’s 3 yuan breakfast and discount stores for snacks and daily necessities. Wang Guoyu, the founder of Nanchengxiang, said that the introduction of low-priced breakfasts is to increase awareness and guide customers to the store for lunch and dinner with higher unit prices. This strategy cannot be achieved without anti-inflation prices.
The share price of listed company Kweichow Moutai plunged in May. Even if the premium in the circulation stage decreases, the impact on performance seems to be limited as long as the ex-factory price does not change. However, Kweichow Moutai once raised its ex-factory price when the premium increased. Now it is difficult to raise prices, and the market shows concerns about the growth of Kweichow Moutai.
This drop in share prices also directly hit the wallets of local governments. Kweichow Moutai’s parent company, China Kweichow Moutai Group, allocated shares to Guizhou Province for free for two consecutive years in 2019 and 2020. It is reported that Guizhou Province cashed out 70 billion yuan by selling some of its shares. At the peak of the real estate market, Moutai shares became a valuable source of revenue for local governments.
Part of the parent company’s shares have actually been transferred to the social security fund. The Chinese Academy of Social Sciences estimated in 2019 that the public pension funds of 340 million people, including corporate employees, will be exhausted by 2035.
China’s birth rate is falling faster than predicted five years ago, and pension finance issues are becoming increasingly severe. As one of the countermeasures, the Chinese government has transferred shares of state-owned enterprises to the social security fund. The original intention is not to see stock prices fall.
The impact of the “Moutai bubble” bursting cannot be underestimated. In addition to sluggish consumption, local governments and public pensions are also facing severe financial difficulties. The cash cow of local governments selling land use rights has been gradually lost, and the alchemy of using state-owned enterprise shares has also stagnated.
Everyone knows that a lively drinking party will end one day. But the intoxication is too strong, so we have to keep drinking. After a night of heavy drinking, it takes a long time to get rid of the hangover. The headache and nausea caused by the “hangover” seem to continue in the Chinese economy for some time.
The author of this article is Zhang Yongxiang from the Nihon Keizai Shimbun (Chinese version: Nikkei Chinese website)
Copyright Statement: All rights reserved by the Nihon Keizai Shimbun. Any unauthorized reproduction or partial copying is prohibited and violators will be prosecuted.
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