A tax notice at the start of 2026 has punctured one of China’s most audacious brand-building experiments in premium baijiu. On Jan. 21 Tianyancha published public-tax information showing that two Hengchang entities in Maotai town owe a combined RMB 132 million in unpaid taxes, including value‑added, corporate income, consumption and city maintenance levies. The legal representative for both firms is Zhang Jiahao, the son of exhibition and property magnate Deng Hong, who has been the public face of the Hengchang push into high-end “sauce‑aroma” (jiangxiang) liquor.
The rise of Hengchang was rapid and theatrical. Deng, famed in China’s exhibition and real‑estate circles, moved into the distilled spirits market in 2017 and used heavy capital, celebrity partnerships and high‑stakes marketing to position Hengchang as a Moutai‑style rival. He bundled prestige by sponsoring the Hurun Rich List for six consecutive years, courting wealthy buyers and borrowing the language of “national liquor” and Maotai provenance to justify stratospheric price tags.
That positioning now lies in tatters. The tax disclosure itemizes consumption tax arrears of roughly RMB 92.8 million, VAT arrears of about RMB 11.8 million and corporate income tax arrears of around RMB 9 million, among other levies. For a company that once touted annual sales above RMB 1.5 billion and announced an audacious plan to hit RMB 10 billion or more within a few years, these liabilities are a clear sign of broken cash flows and strained distribution relationships.
Hengchang’s woes are not purely idiosyncratic. The broader sauce‑aroma segment has entered a correction: industry trackers recorded a 13.33% drop in production capacity for sauce‑flavor baijiu in 2024, the first negative year in six. The bust follows a multi‑year bubble in which speculative buying, brand scarcity and premium pricing pushed valuations and expectations to unsustainable levels.
The company’s playbook had borrowed heavily from real‑estate tactics: pre‑sell, high leverage and aggressive brand‑led marketing. Hengchang’s flagship “classic” SKU was once recommended at RMB 1,599 but now trades on mainstream retail platforms for RMB 300–400, a collapse of more than 70% versus suggested retail. That price inversion has driven distributors into loss‑making sales and detonated channel confidence.
A second factor has been the proliferation of so‑called “debt wine.” When property partners such as Sunac hit liquidity crises, batches of Hengchang product appeared as payment for construction and supplier claims. Those bottles, transferred at accounting prices well above what the market would bear, were quickly dumped at low prices, accelerating the brand’s downgrading from “high‑end sauce liquor” to a commodity associated with distressed developers.
Heavy capital expenditure has compounded the problem. In 2021 Deng and Sunac announced plans to build a RMB‑plus‑100 billion wine, culture and tourism estate in Maotai town — a signal of ambition in boom times that has become a fixed‑cost burden. High inventory levels, combined with weak terminal demand and unpaid consumption tax (a levy tied to production and sales), suggest large volumes of finished stock sit unsold and taxed but not monetized.
The Hengchang case also underscores shifting regulatory and market realities. Earlier regulatory action penalized misleading claims tying Hengchang’s lineage directly to the state Maotai works, undercutting the heritage narratives that had helped sell premium positions. At the same time, tightening capital markets and a cooling luxury and corporate‑gifting market have removed two sources of demand that once buoyed premium baijiu.
The contagion has already spread beyond Hengchang. Since mid‑2025 several mid‑tier and formerly respected producers, including Anjiu, Xiaojiaolou and Yaxijiao, surfaced with tax or enforcement notices. The sector appears to be undergoing consolidation and a re‑rating, rewarding firms with deep retail reach, disciplined pricing and sober balance sheets while punishing leveraged brand experiments dependent on opaque related‑party channels.
For Deng Hong the public pivot has been conspicuous but insufficient. He stepped back from direct ownership of some holdings in 2023, transferring his stake to his son and increasingly experimenting with a social‑media persona aimed at lifestyle branding. That online presence has done little to cover the offline indicators: mounting tax liabilities, collapsing wholesale prices and swelling inventories.
Hengchang’s collapse is more than a cautionary tale about one entrepreneur’s overreach. It illustrates how the interplay of leveraged real‑estate capital, marketing that trades on proximity to national icons, and a speculative premium in a narrow product category can create fragile corporate structures. As the cycle turns, the industry will likely see more distressed assets, tighter regulatory oversight of origin claims and a premium on brands that can demonstrate authentic consumer loyalty rather than manufactured scarcity.