The watchdog’s comments on replacing business beverages with “proper values” dropped most alcohol-related stocks.
China should reduce alcohol consumption and replace it with “correct values,” said the Chinese Communist Party’s anti-corruption watchdog in a comment on a sexual assault case involving employees of Alibaba Group Holding Ltd.
Some “under the table rules” like forced drinking for business purposes can lead to crime, the Central Disciplinary Inspection Commission said in an article posted in the opinion section of its website under the name Shi Zhe. Anyone breaking the law in the Alibaba case will be severely punished.
Most alcohol-related stocks fell in trading on Wednesday. The front runner K Weichow Moutai Co. lost up to 2.1%, while Wuliangye Yibin Co. – its next largest competitor by market value – fell as much as 2.8%. The wine maker Shanxi Xinghuacun Fen Wine Factory Co. even lost 3.2%.
China has taken steps in recent weeks to tackle a variety of sectors seen as contributing to societal problems the Communist Party is trying to solve, particularly ahead of next year’s biennial convention at President Xi Jinping is expected to secure a third term. Investors have dumped stocks in every sector criticized in government media, from digital games and e-cigarettes to real estate and baby food.
Alibaba this week fired a manager accused of rape in an attempt to contain the aftermath after an employee’s report of her ordeal went viral on social media and sparked a heated debate over rampant sexism in China’s tech industry. The sexual assault allegations, which the employee first reported on Aug. 2, exposed systemic challenges with the company’s mechanisms, Chief Executive Officer Daniel Zhang said in an internal memo from Bloomberg News.
An outside customer and several executives were involved in the incident one night in the northeast of the country. It highlighted the ubiquitous abuse of women workers in companies in China, where the #MeToo movement has not been as widespread as in Silicon Valley or elsewhere.
The CCDI comment highlighted the pressure employees face when they fail to drink on company outings.
“Difficult to Resist”
“If you don’t drink it, it will be considered a disregard of the ‘rules’ not to give a face to the leader,” it said. “To avoid bullying and isolation, which affect future prospects, many people have to give in or get involved, and it’s hard to resist.”
China’s premium distilleries have followed government regulations closely to avoid the attention of Chinese regulators rather than pursuing ambitious growth. For example, it has been several years since Moutai increased the factory price of its core Baijiu product, Feitian, which has remained at 969 yuan ($ 150) per pint for three years. It also increased direct sales after regulators condemned traders who would hoard inventory and raise the price.
“The government has strict guidelines to require self-discipline and strict obedience to the law for those who gather around a drinking table,” said Peng Hong, director of the Guangdong Liquor Association, in response to the guard dog’s comment. “This should only be an isolated incident and is not expected to have a significant impact on the industry as the market has a consensus that they should behave well when drinking or they will be punished.”