Ebbing demand for China's favourite firewater adds to debt concerns
In the weeks before Lunar New Year, tourists traditionally flock to the town, nestled in the mountains of the southwestern province of Guizhou, to buy the baijiu, or white spirit, as gifts — this year, those crowds were notably smaller.
The premium spirit made locally by Kweichow Moutai has for decades been a fixture at weddings, business dinners and state functions, but its sales in the past two years have been hit by poor consumer and business confidence.
Victor Shih, a professor of political science at the University of California San Diego, says Moutai's strong cash flows have been «an important part of the strategy to help Guizhou's government repay debt that is constantly coming due».
That means any contraction in Moutai's profit constitutes a problem for the government, which «needs that money to repay their debt and to run the government,» he added.
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