April 11, 2013
Translated by Yu Menglu
Stocks in companies that make Baijiu, a clear spirit that is distilled from sorghum, rose on Tuesday after rumors that regulators were planning to lift the minimum level of chemical plasticizer permitted in the beverage.
Baijiu stocks have been hit hard in recent months. Late last year they were rocked by a health scandal involving excessive levels of chemical plasticizer and then two of the industry's dominant players were fined earlier this year for price fixing.
Last month Baijiu stocks also plunged in response to statements from China's new premier that the new government would rein in lavish spending on entertainment by officials.
On Tuesday however, stocks in some of China's biggest Baijiu companies opened higher on rumors that the China National Food Industry Association (CNFIA) would relax standards applying to the amount of chemical plasticizer that can be present in the liquor.
On the afternoon of Apr 9, the official Sina Weibo account of CCTV news posted an update saying that CNFIA would release a new plasticizer standard for liquor products within two months. The post also said that the limit on the amount of chemical plasticizer permitted in liquor products would be lifted by a significant amount.
According to a report in today's Beijing News, people working in the industry said that if the report was true, 80 percent of Baijiu companies would be able to meet the standard.
During trading on the Shanghai and Shenzhen bourses yesterday, Baijiu shares rose dramatically on the back of this news, with trading in shares of Jiugui Liquor Co. Ltd (酒鬼酒), the company most heavily impacted by the recent scandal involving high levels of plasticizer, halted after rising 10 percent.
However, Liu Yuan (刘员), Secretary General of China National Association for Liquor and Spirits Circulation, yesterday said that China had never had a standard for plasticizer levels in liquor, so he found it hard to understand how they might be relaxed.
Ma Yong (马勇), Deputy Secretary General of CNFIA, said that over the past two months the relevant departments had been involved in formulating a "temporary limit value" for plasticizer usage in Baijiu (白酒塑化剂临时限量值).
Mr. Ma explained that the new standards for Baijiu currently under development, can not be compared to the current limits that apply to the presence of chemical plasticizer in food containers and packages, which is based on a document issued by China's Ministry of Health.
The share prices of some of China's biggest Baijiu companies reacted positively to the rumors of a more relaxed standard for the chemical additive, though some market analysts said that that the rise had more to do with a growing demand for Baijiu stocks after recent falls.
Against the back drop of the Shanghai stock index remaining essentially flat, Baijiu stocks were up markedly. Aside from Jiugui Liquor, shares of Gujing (古井贡酒) rose by 8.3 percent and stocks in the two best-known brands of Baijiu, Wuliangye (五粮液) and Guizhou Moutai (贵州茅台), both rose by about 4 percent.
Links and Sources
Beijing News: 传塑化剂放宽白酒板块飙升
