moutaiBy George Chen
The opinions expressed are the author’s own.

Have you ever tried Kweichow Moutai, the Chinese liquor also known as baijiu? If not, I am afraid some people may say you don’t really know China that much.

Leading Chinese liquor producer Moutai, which has fans worldwide from first Chinese Premier Zhou Enlai to former U.S. President Richard Nixon, said on December 16 that it would raise prices on its products by an average of 20 percent from next year, another clear sign of how difficult it will be for Beijing to rein in inflation.

Moutai’s price increase came as a surprise but turned out to be good news for its Shanghai-listed shares — up more than 3 percent by Thursday’s market close — and Moutai is one of the most expensive stocks in China, nearly 207 yuan (US$31) per share. In fact, the news of Moutai’s price increase also helped the entire retail sector as more analysts put buy ratings on retail stocks for 2011 as inflation is now clearly confirmed as a very important investment theme for next year.

Moutai said it wanted to serve customers better, however, it also faced the pressure of rising costs, so a modest price increase should be understood. Fair enough? Apparently, Chinese consumers do not seem to blame Moutai — perhaps they are becoming accustomed to the trend.

Before the price rise, the wholesale price of a high-quality bottle of Moutai directly from the factory was about 500 yuan, but you can’t normally get it at such a low price. To be more realistic, in the secondary wholesale market, the price is more than 1,000 yuan and the retail end-price for consumers is above 1,500 yuan. Even so, many consumers complain they find it difficult to buy Moutai at stores, which often sell out due to demand, especially during festivals or holidays when the Chinese just love to drink Moutai.