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Qiao Hong

Kweichow Moutai confirmed yesterday that its former general manager, Qiao Hong, is in custody and under investigation for corruption.

The company said it received a notice from the State-owned assets supervision and administration commission of the Guizhou provincial government, the local state assets watchdog, on Friday evening, saying Qiao is suspected of taking bribes from a sponsor at the 2002 World Cup in South Korea.

There were rumors that Qiao accepted a bribe of at least 3 million yuan from a Shandong -based tour agency, which helped organize Moutai distributors' travel to South Korea.

Two different billing contracts, worth 5 million yuan and 8 million yuan, have been found between Moutai and the travel agency, insiders said.

The company had no immediate comment. Moutai's stock price dropped 1.83 percent to 96.63 yuan per share yesterday.

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The investigation is focused solely on Qiao and would not influence the company's day-to-day operations, Moutai said in a statement.

A report from Guotai Jun'an Securities said the scandal will have just a short-term effect on Moutai's sales and production.

The company will be un-affected in the long term thanks to strong brand recognition and the high demand for its products. Moutai's distribution channel is not likely to be influenced either, the report noted.

However, an insider was quoted by the Economic Observer as saying that Qiao's problem is the tip of the iceberg. The investigation's next target would be the company itself.

A Kweichow Moutai booth at a fair in Nanjing, capital of East China's Jiangsu Province. Yang Xi

Moutai is one of the country's most popular and profitable distillers of traditional Chinese liquor. Since taking over in 2000, Qiao helped raise the firm's sales from 980 million yuan in 1999 to 6.2 billion yuan last year.

The stock, a favorite of investors at home and abroad, was one of China's best-performing major stocks last year. In January it became the first mainland stock to rise above 100 yuan in nearly six years.

Shareholders have wondered about Qiao's whereabouts for the last two weeks. When rumors surfaced that he was under investigation, Moutai shares plunged and the firm was forced to suspend trading on May 10.

Trading was reopened on May 14 when the firm said Qiao was appointed to a new job at the State-owned assets supervision and administration commission of Guizhou provincial government. 

(China Daily 05/22/2007 page14)

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