Real estate cycles run for decades, and their imprint is so deep that people mistake a long phase for a permanent condition. Baijiu — Chinese liquor — walked the same road, on a shorter clock. Around 2016 and 2017 it became a market speculation vehicle, with a twist: over the same stretch of time, its price as a consumer good and its price as an asset rose together.
How the Two Tracks Ignite Each Other
Consumer markets and financial markets usually move to their own rhythms, but sometimes they converge. Baijiu is the cleanest case study. More people drank it, so retail prices climbed. Rising prices gave the financial market a story, and money flowed in, bidding up liquor company stocks. Soaring stocks made baijiu look like a collectible asset in its own right, so more people hoarded bottles. Hoarding tightened actual circulating supply, which pushed consumer prices up again. Consumer price rises feed the financial narrative, the narrative feeds hoarding, hoarding feeds consumer prices — a self-reinforcing loop closes. The two markets amplify each other, rising and falling in lockstep, until the trend swells far beyond anything real demand would justify.
Steady Demand Does Not Mean No Cycle
The most popular defense of baijiu goes: the demand never disappears — young people may not drink today, but they will when they’re older. That answer misses the question. Demand does persist, and it doesn’t swing cyclically. But the price of the past decade stacked drinking demand together with hoarding, collecting, and financialization. Prices are set at the margin, and the marginal buyer wasn’t buying baijiu to drink it; they were buying it to sell higher. The financial layer is where the volatility lives, and steady drinking demand can’t stop that layer from deflating.
The story’s climax follows the classic cyclical script: prices keep climbing, the legend keeps getting retold, the value gets framed as eternal. Then, a few years back, baijiu prices and liquor stocks started falling together. Today hardly anyone talks about baijiu — the market’s hot narrative is tech stocks. Eternal stories vanish as fast as they appear.
One Test Settles It
So to judge whether a commodity has entered its speculative phase, skip the elaborate supply-demand models. Two checks are enough. First: is it being hoarded in volume? Inventory detached from actual consumption means the price carries a financial premium. Second: is it being celebrated in terms that ignore demand? When the pitch shifts from “it tastes good” to “it holds value,” “it’s eternal,” “the young will drink it when they age,” the story being sold is financial, not consumptive. That kind of eternity talk is itself top-of-cycle language — the more often it appears, the closer the turning point. Baijiu was never scarce enough to be irreplaceable; for one stretch of time it was simply treated as a financial asset. Cyclical asset isn’t what baijiu is. It’s a phase baijiu went through.
