Prices for Chinese liquor drop ahead of Spring Festival (2)

The drop in popularity came "on the back of a public debate about whether government officials, the largest customer base for Moutai, should be allowed to consume a brand which is effectively a luxury brand with its main product retailing at 1,800 yuan a bottle, and also a health scare involving the use of plasticizers", said Rupert Hoogewerf, founder and chief researcher of Hurun Report.

Yuan Renguo, Kweichow Moutai's chairman, said at the recent two sessions of the legislative and consultative bodies in Guizhou that the company will slow its growth rate to reach an 18 percent year-on-year rise by the end of this year.

Stocks of major listed liquor makers slumped on Monday, with Moutai dropping more than 5.58 percent and Wuliangye falling more than 2 percent.

According to iFind, a financial information product developed by Zhejiang Hithink Flush Information Network, Moutai lost more than 10.9 billion yuan in market value on Monday, and the 13 major listed baijiu stocks lost a combined 26 billion yuan. Since November, the 13 companies have seen their market value shrink by about 200 billion yuan.

Yang Chengping, chief adviser of Jiangxi Association for Liquor and Spirits, said the drop in value has been compounded by a decline in overseas capital flowing into the Chinese baijiu industry.

"Overseas money flooded the Chinese baijiu industry in 2008, especially speculating on the price of Moutai. Now they are retreating from the market and thus the recent decline in prices," Yang said.

But the most urgent issue for the baijiu industry is introducing a production standard, Yang said.

"With this price fluctuation and industry adjustment, we hope Chinese baijiu will make their brand names better known and provide consumers products which are safe and of better quality," he said.