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China's tax hike targets "liquor culture"
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09:59, August 03, 2009

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High-end Chinese liquor across the country has undergone a price hike two days after a change in the State consumption tax on liquor took effect. Retailers in cities where liquor prices have not risen are expecting a rise as producers will eventually pass the cost to consumers.

The price of Moutai – a clear, sorghum-based liquor popular among executives and high-ranking officials – for example, has risen from 698 (102.6 dollars) to 728 yuan at the Haoyouduo liquor shop in Chengdu, Sichuan Province, home to a number of well-known liquor brands.

According to the Xinhua News Agency, Sichuan-based Tuopai Yeast Liquor headed the other brands raising their prices after the new tax regimen took effect.

Although high-end liquors haven’t seen a price jump in Guizhou, the province’s best-known Maotai, China’s national liquor, is in short supply, which is likely to be followed by a rise in prices soon, Xinhua reported.

“None of the prices of liquor in our store have risen yet,” a salesperson at a Tiankelong store on Chaoyang Road in Beijing, told the Global Times, adding that “prices will definitely rise in a month.”

China changed the tax base on liquor August 1, increasing the amount paid by distillers, thus increasing final prices to consumers.

Liquor production in China totaled 2.06 million kiloliters in the first five months of this year, an increase of 17.44 percent on the previous year, with sales of 76.7 billion yuan ($11.3 billion), up 21.95 percent on the same period, according to the Association of Chinese Liquor.

Several liquor stores in Beijing’s Central Business District said prices of high-end liquor, such as Wuliangye, Moutai, and Langjiu, have risen by about 10 percent.

The owner of a liquor store on Guanghua Road in the capital’s Chaoyang district, who asked to remain anonymous, said that, unlike the cigarette industry in which the State controls retail prices, liquor producers set the prices.

“The rise in prices won’t cause much loss to us. Customers who buy high-end liquor won’t care much, since they are affluent and also buy it for gifts,” the liquor store owner told the Global Times.

This is not the first time Moutai has risen its price this year. In June, the distillery adjusted its price by an average of 30 to 40 yuan per bottle.

“Drinking good liquor is the embodiment of social status and identity in China, which relates to all aspects of Chinese society,” Ding Gang, a senior editor for People’s Daily, told the Global Times.

A “liquor culture” has also deeply infiltrated the lives of ordinary people, he said.

“People tend to drink good Chinese liquor on days of big celebration, or to give to distinguished guests,” Ding said.

Ding noted that the price of the mid and low-end liquor will climb shortly, because a large amount of grain was used to make liquor, which would compete with the nation’s increasing demand for food.

But the distillery is also accused of harming the environment.

In 2007, the Moutai distillery sold more than 6,800 tons of its product, but the production process also created 80,000 tons of dregs, which was a major source of pollution at its production base in mostly rural Guizhou Province in southwest China.

Moutai is known as China’s official state banquet liquor, and is also the only alcoholic beverage presented as an official gift. It received additional exposure in China and abroad when Zhou Enlai, the former premier, used the liquor to entertain Richard Nixon during the state banquet for the US presidential visit to China in 1972.

“Few commodities have the close relationship Maotai does with politics,” Yuan Renguo, general manager of the Maotai Group, told Xinhua, adding, “Maotai liquor has played a very important role in China’s political life and diplomatic affairs. And that is the Chinese characteristic of the alcohol.”

In February, two liaison offices of Henan Province in Beijing were reported to have spent 660,000 yuan to buy 777 bottles of “Guizhou Moutai.” Netizens vented their anger on popular news portal sina.com, lambasting the phenomenon of feasting with public funds and demanded supervision of the use of public funds in China.

“Liquor culture conflicts with the modern administration principles, which forbid unnecesary banquets at government expense,” said Zhang Yiwu, a Chinese literature professor at Peking University.

Zhang said that improper behavior by some officials feasting extravagantly greatly harms the image of the overnment, which also calls for close supervision of the use of funds.

“Banquets with high-grade liquor are still popular in government sectors. To change liquor culture, the government needs to take the lead,” Zhang said.

Source: Global Times




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