KWEICHOW Moutai, China's most famous liquor brand, has promised a price cut during the upcoming Spring Festival.

The move follows reports of large price rises driven by strong demand.

"The maximum wholesale price of 53-degree Moutai, one of our best-sellers, is limited to less than 600 yuan (US$82) a bottle, and the ceiling price in retail is 700 yuan - both 50 yuan down from the original prices," said Yuan Renguo, chairman of Kweichow Moutai Distillery Co Ltd in southwestern Guizhou Province.

The company's u-turn comes in the wake of price increases reported last week, when Xinhua news agency said 53-degree Kweichow Moutai was on sale in Beijing's Xizhimen area for 728 yuan, an increase from the previous price of 688 yuan.

The company said at the time that the price increase was a natural response to rising market demand.

All of Moutai's sales agents, including speciality stores, have been required to cut asking prices within a week.

"Store managers and sales associates will be punished if they don't abide by the price limits," Yuan said.

The policy came on the heels of an increase in Moutai's producer prices by 20 percent on average, said Yuan, adding that the increase was a result of the growing cost of production and insufficient market supply during the festival season.

The Spring Festival usually creates a huge demand in the liquor market, with strong drink being considered a must-have at family reunions and as a New Year present to relatives and friends.

Moutai was named a national liquor in 1951 and has since been used on official occasions to fete foreign heads of state and distinguished guests.

It is the only alcohol given as official gifts by Chinese embassies in foreign countries and regions.