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China’s corruption crackdown targets the holiday mooncake

Shilpa Harolikar | Flickr Open | Getty Images

Beijing's ban on officials using public funds to buy mooncakes as Mid-Autumn Festival gifts is set to take a bite out of the country's consumer spending.

"It's certainly going to hurt holiday sales," said Stephen Sheung, investment strategist at SHK Private, noting the Mid-Autumn Festival ranks second among China's holiday sales periods, after the Lunar New Year. For China's shoppers, the two holidays are comparable to Christmas and the back-to-school period in the U.S., he noted.

The round cakes, filled with ingredients such as red bean paste and salted duck eggs, are a big business in China. In 2011, mainland consumers spent around 15 billion yuan ($2.45 billion) on the Mid-Autumn Festival's traditional delicacy, with over 10,000 manufacturers producing more than 280,000 metric tons of mooncakes, according to data from the Hong Kong Trade Development Council.

(Read more: China's anti-corruption drive hits New Year sales)

Analysts say China's move to bar the use of public funds to purchase mooncakes is in line with Beijing's new drive to stamp out corruption and official extravagance. Mooncake gift packages aren't just about eating; they can be sold to redistributors, which are often conveniently located near government offices.

The anti-corruption drive is already being felt in other luxury foods, with sales of shark fins and more expensive seafood already down, according to Song Seng Wun, head of research at CIMB in Singapore.

"If they hadn't clamped down as they did, we would certainly find more extravagant and more expensive mooncakes," he said. Manufacturers can enter the luxury zone by stepping up ingredients to include truffles, sesame paste or even gold leaf. "This pulls the plug on more extravagant shows and gifts and ultimately it will factor down into normal retail sales figures," he said.

(Read more: Rattled by investigations, foreign firms in China beef up compliance)

To be sure, mooncakes have lost some of their traditional power.

"Boxes of mooncakes used to be indicators," Song said. Traditionally, businesses send boxes of mooncakes to clients; the quantity and price range could offer indications of how the economy was performing.

"Since the volatility in the economic cycle in the aftermath of the Lehman crisis, coupled with businesses being more mindful about these gifts as buying favors, the compliance everywhere has been a lot tougher. It's not just the Chinese government," Song noted.

(Read more: China aims to expand luxury goods, property tax)

While he does appreciate having mooncakes as snacks in the office, he's glad to see the quantity come down. "I'm getting fat," he said. Mooncakes can have upwards of 800 calories each.

Still, mooncakes are likely to remain a part of the family dinners that are a traditional part of the holiday celebration.

"If you don't have it, it might be a little awkward," SHK Private's Sheung said.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

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