Recent analysis from Goldman Sachs suggests that China’s baijiu industry is emerging from its most difficult phase. While macroeconomic demand recovery still lacks clear signals, the sector is showing early signs of stabilisation and is now in the early stages of a rebound. Supply-side acceleration in capacity clearance has helped channel inventories move toward healthier levels, and wholesale prices for major sub-premium brands have begun to stabilise. The report outlines four specific areas where these stabilisation signals are visible.

Supply and Demand Dynamics – This year has seen accelerated supply-side consolidation, ranging from smaller producers exiting the market to major brands pausing capital expenditure plans. This tightening of supply is gradually rebalancing the industry after years of over-expansion.

Initial Wholesale Price Stabilisation – Sub-premium brands such as Jinshiyuan, Gujing Gongjiu, and ZJLD, along with ultra-premium leader Moutai, have gone through three to four quarters of destocking since the second or third quarter of 2025. Continued destocking, combined with strict channel control, is pushing inventory structures toward a healthier state. For the ultra-premium segment, Goldman Sachs also predicts that recovering home prices in select first- and second-tier cities could provide demand support, as historical data shows a clear positive correlation between ultra-premium baijiu sales growth, Moutai’s wholesale price, and property price trends.

Cash Flow Returning to Recovery – In the first quarter of 2026, both sales growth and inventory levels for ultra-premium and sub-premium segments rebounded simultaneously, signalling a preliminary recovery in dealer orders and restocking appetite. The operating cash flow-to-revenue ratio edged up for ultra-premium brands in Q1 2026, while sub-premium players also saw improvement (after recording negative ratios in Q4 2025). Although the industry will continue to face pressure through 2026, Goldman Sachs projects that by 2027, most baijiu companies will see operating cash flow growth improve sequentially, supported by margin recovery.

Capital Expenditure Cycle as a Potential Tailwind – The investment and ancillary spending tied to the “six networks” initiative—particularly in Jiangsu and Anhui provinces—is expected to drive a rebound in fixed-asset investment growth in the second half of the year. This, in turn, could underpin baijiu consumption demand and provide further support for sector valuations. Overall, while the road to full recovery remains gradual, the combination of supply rationalisation, price stability, cash flow improvement, and fiscal spending tailwinds points to a more constructive outlook for China’s baijiu market in the coming years.