But Moutai’s exorbitant price—roughly $300 for a premium bottle—combined with its longstanding links to China’s governing elite have made it an ideal target in President Xi Jinping’s mounting campaign against corruption and extravagance. Though Moutai is officially recognized as China’s “national liquor,” often served at state functions, it is priced beyond the reach of average consumers. And because of this high price, Moutai is commonly used as a currency in bribes, prompting the popular saying: “Those who buy Moutai never drink it, while those who drink it never buy it.”

Nowhere have the effects of Xi’s anti-corruption campaign been felt more acutely than in Maotai village. Dozens of baijiu shops that line National Liquor Avenue, the town’s main commercial street, are now shuttered. A local vendor with the surname Zheng estimated that one-third of these shops have gone bankrupt since Xi came to power. In 2012, local GDP growth in Maotai village declined for the first time in more than 20 years; it is expected to fall further in 2013.

And Xi’s crackdown on luxury goods shows no signs of abating. Last week, at a meeting leading up to this weekend’s Third Plenary Session of the 18th Party Central Committee, top government officials approved regulation to fight waste and extravagance among Party and government departments.

“In recent years, some Party and government departments occasionally competed for ostentation and extravagance, which led to huge spending and waste as well as strong reactions from the people,” read an official statement released after last week’s meeting.

The shock to the baijiu industry has been sudden, but many industry analysts suspect that the ripple effects could be even more severe. In China, baijiu is more than a mere beverage—business deals and government contracts are rarely sealed without celebratory toasts of the liquor.

“When my company has important meetings or conferences, there is always Moutai to keep things running smoothly,” said Zhu Jianhui, a recent hire at a major state-owned enterprise based in Beijing. “I quickly learned that I would need to learn to drink baijiu if I wanted to survive life in a major state-owned enterprise.”

Moutai is even said to have played an indispensable role in China’s diplomatic history. Long-time premier Zhou Enlai—who is rumored to have once downed 25 cups of Moutai in one sitting—used the beverage to entertain Richard Nixon and Henry Kissinger during the state banquet for their landmark visit to China in 1972. At the time, Kissinger reportedly said: “If we drink enough Moutai, we can solve anything.”

During the Long March, the historic 1930s Red Army retreat across China, Communist soldiers spent several days in Maotai village, using the local liquor supply to clean wounds, fight diarrhea and calm their wartime nerves. “The Long March was a success in large part due to Moutai,” Zhou Enlai later told historians.