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Distilleries in Maotai Town, known for China’s most prestigious liquor brand, are to be merged to stop the ecological deterioration of the waterways on which its fiery taste depends. Small producers are crying foul

By Zhou Qunfeng Updated Aug.1

Liquor brands line the banks of the Chishui River, Maotai Town in Renhuai, Guizhou Province, April 2019

Alcohol is big business in Renhuai, a city in Southwest China’s Guizhou Province. The smell of fermenting grains permeates the area. When it rains, the Chishui River – the name means “red water” – turns red and the city government posts a reminder on its website that now is a good time to use the water to make yeast.  

For years, the quality of the water and its distinctive color, full of good microbacteria from the area’s red soils and which has no large industries or dams, was a draw for liquor manufacturers. A tributary of the Yangtze, the river is known as the lifeblood of China’s top liquor brands. Now water pollution because of unchecked development of large and small distilleries, both State-run and privately owned, is threatening the very water the distinctive alcohol brands rely on.  

If people do not recognize the name of the city, they know the name of its most famous company, the State-owned Kweichou Moutai, which produces a liquor served at all special occasions and State banquets. It is as synonymous with the area as Champagne or Cognac are in France, and in September 2021, Renhuai was recognized as the core production area, or terroir, of China’s sauce aroma liquor by the China Alcoholic Drinks Association and China National Light Industry Council.  

The liquor Moutai and other distilleries along the Chishui River produce is a type of baijiu – meaning “white alcohol.” There are four main types of baijiu in China. Sauce aroma baijiu – as in soy sauce – is made from a starter agent (like sourdough bread) added to sorghum, which is fermented multiple times in pits before undergoing the distillation process. This can take up to a year or longer for the aged liquor that Moutai and its competitors sell.  

The other major categories include light aroma baijiu made in northern China, strong aroma baijiu associated with Sichuan Province and rice aroma baijiu, popular in southeast China. The fiery baijiu is known for a high alcohol by volume concentration, usually consumed in small shot glasses and knocked back in a series of toasts at weddings, banquets and work-related events. 

According to the annual local government report, in 2021 liquor production generated 99 percent of Renhuai’s industrial output of designated enterprises – those of annual revenue of 20 million yuan (US$3m) or more.  

Moutai alone, China’s largest baijiu producer with nearly 30,000 employees, posted 2021 revenues of $16.93 billion, according to the annual financial report of the Shanghai-listed company. Liquor production, along with new materials and new energy vehicles is one of nine major sectors the provincial government intends to push for investment, the government declared in early May.  

As distilleries multiplied in the Renhuai region, it came at the cost of severe pollution as shoddy construction and short cuts led to untreated wastewater runoff to the area’s watercourses. 
Distilling baijiu consumes a huge amount of water. All 11 tributaries of the Chishui River flow through Maotai Town, which gave its name to the brand. Maotai Town contains more than half of Renhuai’s liquor production. However, the water quality of the four of the 11 tributaries is the worst by China’s current standard, even worse than Grade V, declared an environmental inspection team from the central government in a press release in March.  

China classifies surface water quality into five tiers from I-V. At Grade V, the water is categorized as poor, and should only be used for general irrigation and landscape requirements. Beyond that, it should not be used for anything. The report warned that illicit land use and construction of liquor enterprises “poses a threat” to the ecological environment along the Chishui watershed.  

Renhuai government launched a campaign to crack down on behavior that impaired the water quality. Some small distilleries were closed, merged or acquired. It ordered all liquor producers to install or upgrade water treatment facilities. Projects with incomplete registration procedures were suspended. The government told NewsChina that they would continue their campaign. However, small producers hope the market and regulations will orient the reshuffling rather than government intervention. 

Water and Land Damage 
Rising in neighboring Yunnan Province, the Chishui River meanders in the mountains of China’s southwest for more than 500 kilometers through Guizhou to Sichuan where it joins the upper Yangtze River. The annual monsoon from May to October washes the red sandstone soil rich in bacteria into the watercourse, turning it the characteristic reddish color. In the winter, the river runs clear again.  

In 2021, driven by the booming liquor business, Renhuai, a county-level city, secured the 12th spot in the list of China’s top-100 counties by GDP, according to the local government. However, in July the same year, Guizhou provincial environmental authorities released a report on its website that an inspection in April that year found chaotic development of the liquor industry in Renhuai had caused the contamination of local streams and severe ecological problems.  

The open criticism by the provincial environmental protection agency showed Renhuai had failed to reach a goal set previously. In 2019, Guizhou provincial government ordered that water quality in Renhuai should reach Grade III (which means the water can be used as drinking water after treatment and is suitable for aquaculture according to national standards) by the end of 2020 by improving sewage treatment of wastewater from the liquor industry.  

According to the provincial document, among the 1,690 liquor producers in Renhuai, with 778 in operation in 2021, only a few large distilleries like Moutai had installed a high-quality cooling water circulation system. After the distillation process, many producers released untreated condensed high-temperature water from cooling ponds directly into watercourses.  

Qiu Shuyi, dean of the School of Liquor and Food Engineering at Guizhou University in provincial capital Guiyang, said the pollution is because of Renhuai’s limited water treatment capacity and illegal discharge of sewage, and it is severe in the rainy season. Wu Mingyong, the owner of a small distillery called Guanchun in Maotai Town, told NewsChina that the fermenting pits used by baijiu makers are often dug out in cellars. They are made of mud and grit and not waterproof, leading to seepage.  

Ou Jie, chairperson of Hanking Distillery in Maotai Town told NewsChina that water in the Renxigou, one of the Chishui River’s tributaries, had been extremely opaque and stinky.  

According to the central and provincial inspection teams, some liquor producers in Renhuai have not moved out of conservation areas, and some began construction before they received either land use approval or an environmental assessment report. Jinjiang, one of the larger distilleries in Maotai Town was punished twice since 2020 for illicit use of forested lands. The 113-year-old wine maker has partnered with Hangzhou Wahaha Group, one of China’s leading beverage producers, since 2013, to form a company that today has an annual liquor-making capacity of more than 5,000 tons employing 350 people. On November 3, 2020, Jinjiang began construction of a 600 million yuan (US$89.9m) mega project which covers 130,000 square meters on the mountainous land along the river.  

As Renhuai is mountainous, land for construction is scarce. Under China’s Land Management Law, an entity can buy a quota of land for non-agricultural purposes from places with extra farmland. The buyer has to find plots of land of the same size and quality and keep them in agricultural use. The purpose of the policy is to facilitate economic growth while securing national food security. To boost liquor industry growth, Renhuai government purchased construction land quotas from other places. But it takes time for a distillery to get approval for the land, and some rushed to start construction before receiving approval or going through the environmental impact assessment. Worse, the amount of land taken to build liquor facilities has far exceeded the purchased agricultural land elsewhere in Renhuai. 

Trouble Fermenting 
On June 8, 2020, seven big liquor producers from Guizhou and Sichuan provinces, including Moutai, convened to release a joint declaration, in which they pledged to protect the environment along the Chishui River. During the conference, Gao Weidong, the then chairperson of Kweichou Moutai Group, said “we must be aware of the ceiling of the ecological system in the Chishui River,” and vowed not to “squander the legacy passed down from our predecessors and leave none of it to generations after us.”  

Lü Yuhua, executive vice director of the Renhuai Liquor Industry Association told NewsChina: “It’s not frivolous to say that if the Chishui River, the mother river of our town, is contaminated by the liquor industry, the development we pursued over the past few years was all for naught.” 

In August 2021, Renhuai launched a campaign to address the pollution issue. The measures included upgrading cooling water circulation systems at distilleries, improving and waterproofing fermenting pits, renovating liquor pools and building ponds for emergency sewage release. 
According to Zhang Fangli, Chairman of Guizhou Qianjiu, a giant distiller based in Maotai Town, and vice president of the Renhuai liquor distillers’ association, all distilleries are required to connect their sewage facilities to the government-run sewage treatment system. The enterprises pay for the service. According to an anonymous senior executive from a local liquor manufacturer, the company spent more than 1 million yuan (US$150,000) on four sets of condensers and upgrades to more than 30 fermenting pits. After the 40-day overhaul, the company saw its sewage release drop from 60 tons in 10 days to six tons in a month, an enormous change that enabled them to pass inspection. Wu Mingyong has spent over 400,000 (US$60,520) to bring his small distillery up to code, which has 10 fermenting pits, six workers and an annual capacity of 100 tons. Hanking spent 9 million yuan (US$1.36 million) on improvements to its facilities. The government said that 728 distilleries had passed the inspection by early May. The efforts seem to have paid off. Renxigou stream is becoming clearer and some fish have returned.  

Distilleries which have upgraded face frequent unannounced inspections by environmental protection authorities. An anonymous official from Renhuai told NewsChina that the local environmental protection authority will suspend any liquor producer who fails to maintain standards.  

People from both Jinjiang and its construction contractor confirmed on condition of anonymity that the project is suspended due to the damage it caused to the mountain forest and incomplete application procedures. The company, along with several other distilleries with similar problems, has submitted application documents and is waiting for approval. 

One Size? 
On February 18, Guizhou Provincial Department of Ecology and Environment began work on legislation to impose the most rigorous measures on environmental restoration, with specified rules on anti-pollution standards, industrial development and market access for liquor producers. 

To reduce pollution, Renhuai government plans to promote mergers and acquisitions of more than 600 micro and small distillers in the next three years. The number of producers will drop whereas the size of producers will increase by 2025. There will be more upgrades and acquisitions to rule out micro and small liquor workshops.  

According to a local government notice on September 7, 2021, all liquor makers in the area should have certificates and licenses granted after completing official procedures, including inspections of their environmental protection operations. Annual capacity of each liquor producer should reach at least 400 tons and the capacity of any new projects needs to hit 2,000 tons each year. By 2025, Renhuai is expected to have a better developed liquor supply chain and 54 giant distilleries, each with annual outputs worth at least hundreds of millions of yuan.  

But these mergers and acquisitions mean a crisis for small distillers. According to Renhuai government press release in early April, 622 distilleries have already been closed. And by early May, 51 undersized distilleries had been merged. Renxigou had 18 small liquor distilleries along the stream since 2000. Small business owners are very concerned about whether the government will order them to close. At a meeting with small distilleries from Renxigou on March 2, 2022, Renhuai government did not specify compensation plans for their relocation. But several local owners told NewsChina that they worry the flavor and quality of their liquors may change if they move to another water source.  

Small distilleries, which have invested a lot in environmental upgrades to continue operations, are concerned they may not survive, and argue it is unfair to penalize enterprises that follow the rules.

An inscription on the cliff face of Wugong Rock where Guizhou and Sichuan provinces meet along the Chishui River says “mei jiu he” (literally “beautiful liquor river”), November 6, 2020