The recent scene at the "Chinese Fine Wines Carnival" in Bangkok, where Southeast Asian buyers eagerly sampled premium baijiu, presented a stark contrast to the subdued mood dominating the domestic market. This divergence highlights a critical juncture for China's iconic liquor industry. As the sector steps into 2026, reflecting on 2025 reveals a consensus of "deep adjustment," characterized by a 1.9% year-on-year decline in the beverage consumer price index and alarmingly high average inventory turnover days of 900. Against this backdrop, the central question emerges: has the industry truly navigated past its most challenging phase? Insights from analysts and executives paint a complex and divided picture.

A segment of the industry, represented by certain financial analysts and company leaders, posits that the lowest point of the cycle is now in the rearview mirror. Their optimism is anchored in a trio of converging factors. Primarily, they argue that the baijiu cycle has historically been a follower of broader macroeconomic trends. Following the series of economic stimulus measures introduced in late 2024, the macroeconomy has shown signs of stabilization and gradual recovery. This foundational recovery, they contend, creates a rising tide that will eventually lift all boats, including consumer spending on baijiu. Secondly, from a policy perspective, the market has undergone a profound transformation since the implementation of austerity measures concerning official consumption. The initial shock has been absorbed, and a sustained increase in private and commercial consumption is now actively filling the void, establishing a new, more sustainable demand base. Finally, the painful inventory correction cycle is believed to have peaked. While the destocking process at the distributor level may persist for several more quarters, the period of maximum pressure—the end of 2024—is considered past. This has allowed for a tentative stabilization in pricing, moving away from the panic-driven "dumping" that previously eroded margins and confidence. In essence, this school of thought acknowledges a "weak recovery"—not a vigorous boom, but a crucial shift from a state of panic and freefall to one of fragile stabilization and marginal restoration of market sentiment. The journey ahead is likened to moving from intensive care to a general ward, where recovery depends on internal strength.

However, a more cautious, and arguably more widespread, perspective urges against premature declarations of victory. This view holds that the industry's troubles are not merely cyclical but are underpinned by deep, persistent structural headwinds that will reshape its future landscape. The continued annual decline in total baijiu output since 2016 is cited as evidence of a sustained contraction, pointing to fundamental demand issues. The challenges are multifaceted. Demographically, a declining population, lower birth rates, and changing social norms are steadily eroding the traditional cornerstone consumption scenarios for baijiu, such as lavish wedding banquets, milestone birthday celebrations, and academic success parties. Culturally, a powerful shift toward rational consumption is taking hold. Consumers are increasingly health-conscious, value-driven, and demanding of extreme "quality-to-price ratio," moving away from the opaque status-driven purchases of the past. On the supply side, the specter of overhang remains; vast quantities of product are still lodged within distribution channels, representing a latent pressure on the market. Experts note that for high-end baijiu in particular, its former roles as an investment vehicle and a default luxury gift have significantly diminished, leaving its core drinking occasions—which remain limited—as the primary demand driver. With disposable income growth under pressure and the middle-class consumer base feeling squeezed, a robust, broad-based recovery in purchasing motivation is not yet visible. Therefore, this camp argues that 2026 may not bring a rebound but rather a prolonged period of "bottoming," marked by intense competition and consolidation. The reality is that the industry's spring, if it comes, will look fundamentally different from its past. A brutal process of differentiation is underway, where brands lacking genuine product strength, innovation, channel efficiency, and a direct connection with evolving consumer tastes face existential risk. This is compounded by the growing inroads of alternative alcohol categories like whisky, craft spirits, and ready-to-drink beverages, which are competing for the same consumer wallet and occasion.

Thus, the question of whether the worst is over lacks a definitive answer. What is becoming unequivocally clear, however, is that the era of passive growth is finished. Survival and success will no longer be granted by a rising market tide but must be earned through a clear-eyed and relentless focus on the fundamentals: creating authentic product value, building operational resilience, and deeply understanding the modern consumer. The path forward is one of strategic adaptation, not a return to the past.