China’s largest liquor company, a favorite of international investors, has become a financial lifeline for the underdeveloped southern region where it is based.
Kweichow Moutai Co. generated billions of dollars for the local government in Guizhou, in large part thanks to the company’s stock price soaring.
High-end versions of baijiu, a powerful alcohol made from fermented grains such as sorghum, have become status symbols in China. That made the state-backed Shanghai-listed company by far the most valuable distiller in the world, worth $ 326 billion, according to FactSet.
The company’s rise to power has been a gift to Guizhou Province, which is Moutai’s majority shareholder. Many other large Chinese state-owned enterprises, including banks, telecommunications, airlines, and oil companies, are owned directly by central government, not local authorities.
Moutai is a big local taxpayer. Other than that, much of the support came from the unlisted, state-owned parent company of Moutai. Enriched by the meteoric success of Moutai, this group has been able to invest in local infrastructures such as airports, railways and highways. He also donated shares in the company to another local government entity, which in turn sold some of them for cash.