A Cash-Strapped Corner of China Finds a Financial Tonic—Hard Liquor

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China’s biggest liquor company, a favorite of international investors, has become a financial lifeline for the underdeveloped southern region where it is based.

Kweichow Moutai Co . has generated billions of dollars for the local government of Guizhou, thanks in large part to the company’s soaring stock price. 

The company’s high-end versions of baijiu, a potent spirit made by fermenting grains such as sorghum, have become status symbols in China. That has turned the state-backed, Shanghai-listed company into by far the world’s most valuable distiller—worth some $326 billion, according to FactSet.

The company’s rise has been a gift for the province of Guizhou, which is Moutai’s majority shareholder. Many of China’s other big state-owned enterprises, including banks, telecoms, airlines and oil companies, are owned directly by the central government, not local authorities.

Moutai is a major local taxpayer. Aside from that, much of the support has come through Moutai’s unlisted, state-owned parent. Enriched by Moutai’s runaway success, this group has been able to invest in local infrastructure such as airports, railways and highways. It has also given company shares to another local government entity, which in turn has sold some of these for cash.



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