New Regulations for Chinese Liquor and COSCO Shipping Control

News came out over the weekend: the new regulations on strict economy and opposing waste in party and government organs, issued on May 18, explicitly ban alcohol at working meals. Yesterday, baijiu stocks dipped along with the broader market, but I don’t think there’s any need to panic.

In plain terms, the impact on premium baijiu has already been largely absorbed. Since the 2011 curbs on “three public” expenses—and especially after Guizhou banned serving alcohol at official functions in 2017—demand from government接待 has basically hit zero. What’s left is either groups that simply ignore the rules and can’t be changed, or those already fully restricted. The chances of seeing Moutai or Wuliangye on the table at official receptions are now extremely slim.

So this is mostly a short-term emotional reaction; baijiu has already stabilized today. The real challenge remains overall consumption recovery—that’s what really matters.

One more thing: from a supply-chain perspective, the baijiu sector’s bottleneck has shifted from “policy suppression” to a “destocking cycle,” and the industry is currently grinding through a bottoming phase after a dual drop in volume and price. COSCO Shipping Control, on the other hand, is a textbook cyclical shipping stock whose earnings are tightly coupled to global trade volumes and freight rate indices (such as the SCFI and CCFI). In 2024, the Red Sea crisis forced vessels to detour around the Cape of Good Hope, boosting ton-mile demand and pushing freight rates higher than expected—but that was a short-term geopolitical shock. Long-term, shipping rates will still revert to fundamentals driven by supply and demand.

Original: Chatting about the new baijiu regulations and COSCO Shipping Control