At the start of 2026 one of China’s most conspicuous crossover bets — an exhibition and property magnate’s plunge into high‑end baijiu — has run aground. Public tax filings show two companies tied to Deng Hong’s Hengchang distillery owe a combined 132 million yuan in unpaid taxes, triggering a stark reversal for a brand that once boasted double‑digit sales and ambitions to challenge Moutai’s rarified tier.
The sums are concrete: Hengchang’s production arm is listed with roughly 92.8 million yuan of unpaid consumption tax and some 11.8 million yuan in value‑added tax arrears, while the sales company has nearly 9.0 million yuan of unpaid corporate income tax. The legal representative for both firms is Zhang Jiahao, Deng’s son and the ostensible steward of the branded group, underscoring that the liabilities sit at the centre of the family’s commercial web.
Hengchang’s fall is more than a single corporate failure; it is a case study of how a frothy segment of China’s liquor market — the so‑called jiang‑flavour (酱酒) premium category — expanded on borrowed narratives and fragile channel economics. Deng entered the sector in 2017, leveraging celebrity partnerships, real‑estate scale projects and conspicuous sponsorships (including a six‑year run as the sole sponsor of the Hurun Rich List) to sell an image: that Hengchang was a modern heir to Maotai’s provenance.
That branding strategy papered over deeper mismatches. Hengchang promoted a flagship “classic” retailing at 1,599 yuan to sit in the sub‑Moutai premium tier, yet on mainstream platforms such as 1919 and e‑commerce channels the bottle recently traded at 300–400 yuan — a price inversion of over 70 per cent. Dealers, unable to sustain margins, have been forced to cut prices or dump stock, while distressed transfers of product as debt repayment (so‑called "debt‑settlement liquor") from property partners flooded markets and accelerated the collapse of the brand’s price architecture.
The wider industry backdrop helps explain why this happened so fast. Data from a jiangjiu research studio show capacity for sauce‑flavour liquor fell 13.33 per cent year‑on‑year in 2024 — the first contraction in six years — as consumer spending shifted, business hospitality declined and inventories accumulated. That structural slowdown exposed companies that had pursued rapid scale through high leverage, aggressive pre‑sale tactics and aspirational positioning rather than durable consumer loyalty.
Hengchang’s earlier capital plans now look quixotic. In 2021 Deng and partners announced plans to pour more than 10 billion yuan into a “wine‑tourism and art” mega‑estate in Maotai town, a project meant to cement brand legitimacy. With cash flows strained, fixed costs from large estates and heavy excise tax obligations became liabilities; high inventory at the distillery likely contributed to the enormous consumption‑tax bill, suggesting production outpaced genuine market demand.
Regulatory and reputational missteps compounded the problem. Hengchang’s marketing that leaned on Maotai’s historical lineage drew administrative penalties for false advertising in 2022, undermining the upscale story it had sold to wealthy patrons and institutional partners. When the real‑estate network that fed the brand’s privileged channels — including Rongchuang (Sun Hongbin) and prominent retail partners — began to fatigue, the propped‑up sales funnel promptly drained.
For investors and executives watching China’s liquor sector, Hengchang’s plight signals a broader shake‑out. The contagion has reached mid‑sized and formerly respectable names in Guizhou, with other distillers also surfacing in tax and enforcement notices. The lesson is plain: brand theatre and closed‑circle sales cannot substitute for resilient retail traction and conservative balance‑sheet management when a cycle turns.