CHINESE liquor is soaring in price, led by Moutai. Xinhua reported last week that a bottle of standard Moutai liquor, with 53 percent alcohol, sold for 500 to 600 yuan (US$80-95) three or four years ago. Now it is exorbitantly priced at 2,000 yuan.

Other lesser-known brands have also dramatically increased their prices in anticipation of growing consumption.

It is interesting to ask the source of that growing consumption. After all, even though consumption of spirits usually peaks at a time of wintry cold and family reunion, consumption is found by market polls to be steadily falling, as people's taste diversifies and they increasingly favor less potent alcohol beverages.

It doesn't take an economist to see the discrepancy between decreased market demand and sky-high prices. But distilleries are not worried, for they have a good patron willing to buy their spirits at whatever price. And the rule is that the higher the price, the better for their "face."

It's that time of year again, when officials are busy attending one banquet after another. It is public knowledge that high liquor prices have been primarily buoyed by an official drinking binge. Ordinary wage-earners can hardly afford to splurge a month's salary on a bottle of spirit. Only government officials wining and dining at public expense are not sensitive to price.

Lavish official expenditure is fueling the boom of premium liquor brands like Moutai and Wuliangye. Moutai sales raked in 13.6 billion yuan in the first nine months of this year, a year-on-year increase of 46.3 percent; its profits totaled 9.3 billion yuan, up 57.4 percent from the same period last year.

'Gauge of corruption'

According to commentator Ye Tan, Moutai caps its annual output at 11,000 tons, 40 percent of which are reserved for the privileged class before they are bottled and shipped from the factory.

Of the remaining 60 percent, nearly 10-20 percent will be up for sale, while the rest will be bought up either as gifts to return official favors or as the alcohol of choice at banquets.

A friend who worked for a local district Party newspaper once told me that her boss stockpiled two cases of Moutai liquor in his office, so that he could fete local publicity officials when they visited, thus brightening his prospects of promotion.

Moutai's price can be viewed as a "gauge of corruption." The higher it goes, the more rampant corruption is, said Ye, the commentator.

In a survey early this year, China Youth Daily asked why liquor prices were so high and 93 percent of respondents said official spending was chiefly to blame. Last year a CCTV report revealed that official meals, cars and overseas junkets amounted to a combined cost of 900 billion yuan a year, almost 30 percent of the country's annual fiscal outlay and 310 times as high as the figure released by the Ministry of Finance. This huge sum left every Chinese with a bill of 700 yuan.

Despite the Chinese government's decree that an official meal should not exceed a certain value, it is doubtful that such a decree is ever enforced.

And with the leap in liquor prices, the amount of public money wasted on extravagant official meals can be expected to grow. And there is little a public with no say over how their money is spent can do to change that.

Officials who have champagne tastes never are deterred by a supposedly beer pocketbook. For them, there is no budget to speak of. So when they go abroad and are feted with less pomp and ostentation, they complain of their hosts' inhospitality. During a visit my editor paid years ago to Japan as a guest speaker at a forum, he had an official lunch comprised of simple dishes such as octopus.

A Chinese companion from a northeastern coastal city grumbled about Japanese stinginess, saying that back home locals would treat guests to sumptuous treats including sea cucumber.

Wining and dining has led to severe distortions in the price of branded alcohol like Moutai, which is now arguably a de facto luxury item.

The sense of exclusivity afforded by its limited supply adds to the contentment of those who consume it. Market demand for Moutai is estimated at 30,000 tons a year, almost triple its current output. The short supply has bred an underground market of fake Moutai, with recycling of bottles at its core. My sister got married in July. After the banquet, several empty Moutai bottles were found to have been stolen. It is reported that a fine bottle can fetch over 100 yuan.

The fat profit margins of liquor have encouraged smaller brands to rebrand themselves as luxury beverages and spend huge money on advertising. Despite the broadcast ban on promoting liquor products, from 2008 to 2011, the value of alcohol-related winning bids for CCTV ad slots has jumped from 6.1 percent to 23.5 percent.

Advertising spree

A previously lackluster liquor brand has taken to hyping its products on outdoor billboards near elevated highways. Knowing it pays to play the patriotism card, the ad attributes its inspiration to China's first aircraft carrier, though they share little in common.

Moutai was not known by the world until Chinese exhibitors deliberately broke the containers and the escaping powerful aroma lured customers at the 1915 Panama World Expo. Now it is more a status symbol than an easily affordable drink.

But it's not the only type of alcohol snapped up by newly rich Chinese. Their new favorite is vintage French Bordeaux, such as Chateau Lafite, which is worth thousands of yuan a bottle.

Amid prosperity there are disconcerting signs, though. Media reports have shown that Lafite's 10 years of output can barely meet one year of demand by Chinese clientele. Though Chinese money is welcome, there is some concern that too much increased production might lead to shortening aging process for some vintages, which might hurt the quality.

There is a clear motive for this spending spree on French Bordeaux wines that few Chinese can truly appreciate. It is a "safer" alternative to cash-filled envelopes handed to officials at year end.

There have been government calls to stabilize liquor prices and possibly raise taxes. But taxing distilleries more will only make the public pay more for official profligacy.

A more practical but unlikely approach may lie in defining Moutai as a luxury item and banning it from all official banquets. Then prices would gradually return to normal.

But denying officials their outrageously expensive luxuries is a slippery slope. If authorities were to ban luxury liquor, they would then face a long list of indulgences that the public also want axed from official privileges.