The new spirit of austerity

Kong Guoqing hasn't seen a quieter Lunar New Year in the 12 years his family has been running their small liquor and tobacco shop in downtown Shanghai.

They didn't sell a single bottle of the high-end spirit made by Kweichow Moutai that has become synonymous with banquets and gift-giving during the national holiday. Kong blames the vanished sales on incoming president Xi Jinping's crackdown on extravagant spending by officials: Kweichow Moutai's sorghum spirit can fetch US$300 a bottle - about half the average monthly disposable income in the financial hub.

"Demand for the most expensive liquors and cigarettes this New Year seemed to have just dried up," said Kong, pointing to red boxes of cigarettes costing about US$10 a pack, or more than six times the price of regular brands. "People are afraid to accept gifts."

The austerity campaign helped push down prices on some high-end spirits by about 30 per cent over the holiday, the Ministry of Commerce said. Kweichow Moutai's shares have fallen 29 per cent since Xi announced the clampdown in November, the biggest drop of 996 companies on the Shanghai Composite Index.

The test now is how committed Xi is to rooting out corruption once the new leadership is cemented at the National People's Congress beginning next week.

"Whether it's a short period as the new leaders are just on board and they're trying to do something, or whether it's an ongoing exercise, that will have different impacts," said Sarah Xing, a Hong Kong-based analyst at Nomura International.