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Baijiu Stocks Sink After Premier Vows to Curb Spending on Banquets
Summary:The share prices of some of China's biggest baijiu companies plunged yesterday, in response to commitments that the new government will rein in lavish spending on entertainment by officials.

Mar 19, 2013
Translated by Li Jing

The Shanghai stock exchange index fell by almost 1.7 percent yesterday to it's lowest point in three months. Although developments in Cyprus along with ongoing concerns about the imminent announcement of more detailed housing policies aimed at keeping the growth in housing prices in check spooked investors, some stocks were also thought to have fallen due to remarks made by China's new premier on Sunday.
At his first press conference as Premier, Li Keqiang vowed to rein in the amount of money that government departments spend on receptions, vehicles, and overseas trips (commonly referred to in Chinese at the "three publics").

Premier Li told journalists that his administration would "not use public money to construct new offices, halls or guest houses for government use."

Li also went on to promise that the number of government employees, spending on official hospitality, overseas trips for official purposes and purchases of official vehicles would be reduced.

When China's stock markets opened for trading on Monday morning, the price of stocks in companies connected with to the entertainment budgets of officials fell sharply.

The already weak baijiu sector, which was rocked by a health scandal last year involving excessive levels of a chemical plasticizer being detected in one brand and also the fining of two of the industries biggest firms earlier this year for price fixing, saw prices fall by an average of 3 percent during Monday's trading, leading the broader market down. According to fund monitoring data, nearly 900 million yuan flowed out of baijiu shares yesterday.

The largest decrease in the wine sector yesterday came from Gujing (古井贡酒), which fell 7.88 percent. The two best known brands, Wuliangye (五粮液) and Guizhou Moutai (贵州茅台) fell 4.54 percent and 4.25 percent respectively.

Baijiu literally means "white liquor" in Chinese. It is usually made from distilled sorghum and its alcoholic content is about the same as whisky or other distilled spirits.

Since beer and other kinds of alcohol are perceived as having little to do with official government receptions, the stock prices of breweries and other alcohol companies remained relatively stable during yesterday's trading.

Links and Sources
The Beijing News: 约束三公消费引酿酒板块大跌
Economic Observer Online: New Rules May Blow Lid off County Bosses\' Baijiu Bills

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