DIAGEO TAKES A GIANT BET ON CHINA’S £17bn SPIRIT

Baijiu dates back 5,000 years and translates as ‘white alcohol’

Baijiu is a sorghum-based spirit that can also contain wheat, rice and corn

It tastes a bit like whiskey but is fermented in pits in the ground

It is steam-distilled several times in stills, aged in massive terra cotta jars, then blended

The Baijiu market is worth about £17bn a year — though mostly in China

It was famously drunk as a toast by President Nixon on his trip to China in 1972 DIAGEO has outlined plans to tighten its grip on a Chinese drinks maker whose distillery dates back more than 600 years.

The British drinks giant, whose brands include Guinness and Smirnoff, wants to raise its stake in Sichuan Shui Jing Fang (SJF) from 39.7pc to 60pc. The move looks likely to cost Diageo around £700m.

SJF is based in the Chinese city of Chengdu and produces baijiu at a distillery set up in 1408.

It is thought to be the oldest and the most complete baijiu distillery in China. Baijiu, a clear liquor traditionally served neat in small cups at room temperature, is one of the most popular spirits in China.

Around £17bn of baijiu is sold every year making it an attractive market for Western drinks companies such as Diageo to exploit.

China represents a relatively small part of Diageo’s business. Its exposure to the world’s most populous country is mostly through its Scotch brands, as well as its SJF investment.