Kweichow Moutai, once the bellwether of China’s consumption-driven economy, is facing an unprecedented slump as the country’s growth engine shifts from real estate and business banquets to high-tech industries. The company’s half-year report, released earlier this month, showed net profit fell 1.95% to 44.5 billion yuan ($6.6 billion) — the first decline for the first six months of a year since 2014, and only the second such drop since 2002, according to Wind Information data.
The latest figures follow a 4.5% decline in net profit for all of 2025, marking the first annual drop on record. Moutai shares briefly fell Monday after the report’s release, pushing year-to-date losses to 5.7% as of Tuesday. The stock has now declined on an annual basis for four consecutive years.
The weakness reflects a fundamental change in China’s economic environment, said Ye Yuhua, fund manager at Ba Luo Fund, in comments translated by CNBC. When the real estate sector thrived, premium baijiu consumption flourished at dinners that sealed deals and celebrated projects. But as the economy pivots toward high-end technology, the people driving that growth are less inclined to drink baijiu.
“It’s an irreversible trend,” Ye said. “Baijiu has become a saturated market.”
From property to AI
China’s second-quarter GDP grew at its weakest pace since the fourth quarter of 2022, with urban fixed-asset investment — including real estate development and infrastructure — declining 5.7% in the first half from a year earlier. The property sector, which once accounted for about a quarter of the economy, has been under pressure since authorities tightened developers’ borrowing in 2020. An intensified anti-corruption crackdown has also weighed on the lavish spending that once fueled premium liquor sales.
Moutai was the largest listed company in mainland China by market capitalization from 2020 to 2023, according to Wind Information. But the balance of power is shifting. Independent stock analyst Dongfang Li noted that several Chinese tech names have surpassed Moutai in market value at various points this year. Memory chip maker CXMT, which listed last month, now has a market cap roughly 2.5 times that of Moutai.
“The market is shifting from the traditional economy’s logic of steady growth to high growth potential and global competitiveness brought about by technological innovation,” Li said in Chinese, per CNBC’s translation.
Not all bearish
Not everyone reads Moutai’s decline as a sign of collapsing demand. Some analysts argue the drop reflects a strategic shift in how the company sells its liquor.
Citi attributed the decline to Moutai’s transition from wholesale to direct-to-consumer sales rather than soft demand, and maintained a “buy” rating on the stock. The bank expects Moutai to benefit from a rotation back into China’s consumer sector, with global long-only investors cautiously returning to high-quality large-cap consumer staples.
Morningstar echoed that view, saying the mix shift toward direct sales likely distorted Moutai’s payment line, while underlying demand appeared stronger than reported revenue growth. Morningstar named Moutai its preferred pick in China’s baijiu sector, citing its competitive position and deepening market-oriented reform.
Both firms pointed to the upcoming Mid-Autumn Festival as a catalyst. Citi said Moutai may have shifted some inventory from the second quarter to the third — when the festival falls — to capture the full benefit of its second round of price hikes, which took effect July 18. Morningstar expects the price hikes and seasonally stronger festival sales to support a gradual earnings pickup in the second half, with net profit growing at an 8% compound annual rate from 2025 to 2030.
The half-year report also revealed that China’s state funds Central Huijin and China Securities Finance — often called part of the “National Team” — were no longer among Moutai’s top 10 shareholders. Citi said institutional investor sentiment likely troughed after that exit.
But Li, the independent analyst, argued Moutai’s high 90% gross margin, profitability, and stable dividend continue to attract institutional money, and he expects allocation to persist.
Retail investors, meanwhile, remain cautious. Wenjie Ding, investment strategist for global capital investment at China Asset Management, noted that ETF data showed net outflows from baijiu-heavy food and beverage funds for most of the year, though sentiment may have improved modestly this month.
As Beijing leaves real estate behind in pursuit of technological leadership, the question is whether Moutai will be dethroned for good — or whether its resilient margins and market position will keep it relevant in a changing economy.
Source: www.cnbc.com — https://www.cnbc.com/2026/08/19/china-economy-moutai-ai-property.html
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