RPT-BREAKINGVIEWS-Moutai price hike signals new China deflation war

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Ka Sing Chan

HONG KONG, April 1 (Reuters Breakingviews) - China’s national liquor may be trying to channel some of Stella Artois’s mojo. The Belgian Pilsner for years used to market itself as being “reassuringly expensive.” Now Kweichow Moutai 600519.SS is raising the cost of its sorghum spirit for the second time in three years. That suggests demand-led inflation is Beijing’s new favourite tipple. It tastes of the government opening a new front in the war against deflation. But winning over frugal consumers will be a challenge.

The $260 billion Shanghai‑listed firm said on Monday that it's raising ex‑factory prices, or what it charges distributors, by 100 yuan ($14.50) to 1,269 yuan per bottle. That marks the second increase since late 2023. In the prior decade, the distiller raised prices only twice, constrained by regulators’ unease over inflation, as well as public perceptions of official excess and social inequality. Moutai is now enjoying greater pricing latitude as Beijing sounds more willing to tolerate, or even encourage, a bit of inflation.

Premier Li Qiang said in his annual policy address in March that his administration would make it a priority to “steer general price levels back to positive territory”. The People’s Bank of China has echoed that message, repeatedly pledging to counter persistent deflationary pressures that have dragged on the $20 trillion economy. Makers of other consumer brands with genuine pricing power, from beer to cosmetics to tobacco, may be emboldened to follow Moutai’s lead. Regulators, for their part, look less inclined to intervene as aggressively as they once did. High-end spending can help boost ailing consumption. Retail sales of consumer goods in the first two months of 2026 rose only 2.8% compared with the same period last year.

Moutai’s price hike has broader resonance because the brand has long been imbued with cultural and financial significance. Its liquor is often treated as a collectible, supporting the perception that vintage bottles, and the company’s shares, represent a reliable store of value in a market with limited investment alternatives.

With regulators’ tacit blessing, Moutai may lift ex‑factory prices more frequently. Doing so helps reassure investors that, at least on paper, the price of its product is still rising. Yet Moutai’s shares are down about 20% since it last made drinkers dig deeper into their pockets. That suggests not everyone is ready to toast the strategy.

CONTEXT NEWS

Kweichow Moutai said on March 30 it would raise its ex-factory price, or the price charged to distributors and wholesalers, by 100 yuan to 1,269 yuan per bottle and the retail price by 40 yuan to 1,539 yuan. Both hikes took effect on March 31. Moutai last raised the ex-factory price of its main liquor, Feitian, in November 2023.The Chinese government will try to “steer general price levels back to positive territory”, Premier Li Qiang said in his annual government work report in March.

(Editing by Antony Currie; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on CHAN/ KaSing.Chan@thomsonreuters.com))