A recent Goldman Sachs research report on China’s baijiu industry offers a cautiously optimistic view: the sector’s toughest phase is over, and early recovery signs are emerging. While broad macroeconomic demand remains uncertain, the investment bank points to four concrete indicators that justify this stance.

First, supply-side consolidation is accelerating. Smaller distillers are exiting the market, and major brands have paused capital expenditure plans. This voluntary restraint reduces excess capacity and helps clear the overhang that plagued the industry through 2025.

Second, wholesale prices are stabilising. After three to four quarters of destocking—from mid‑2025 through early 2026—brands such as Jinshiyuan, Gujing Gongjiu, and ZJLD have seen their benchmark prices firm up. Even super‑premium leader Moutai has benefited from tighter channel control. Goldman also notes a historical correlation between ultra‑premium baijiu sales, Moutai’s wholesale price, and housing prices in top‑tier cities. Should property prices recover in key urban centres, that would provide an additional tailwind for high‑end consumption.

Third, cash flow is rebounding. In Q1 2026, both super‑premium and sub‑premium segments recorded simultaneous improvements in adjusted sales growth and inventory levels, signalling stronger restocking appetite among distributors. Operating cash flow as a share of revenue edged up for super‑premium brands and turned positive for sub‑premium players (after a negative reading in Q4 2025). Although the full year 2026 will remain challenging, Goldman expects most baijiu companies to post sequential improvements in operating cash flow and margin recovery by 2027.

Fourth, fixed‑asset investment—particularly under the “six networks” infrastructure initiatives in Jiangsu and Anhui provinces—is projected to pick up in the second half of 2026. This government‑led spending typically boosts business entertaining and gifting demand, directly benefiting baijiu sales and potentially lifting sector valuations.

In sum, Goldman Sachs sees the baijiu industry transitioning from distress to stabilisation, with destocking largely complete, pricing bottoms out, and cash flows gradually healing. The path to full recovery will be uneven, but the worst appears to be behind. For investors, the key watchwords are channel health, property market cues, and infrastructure spending—all pointing to a modest yet meaningful revival ahead.