(Yicai Global) May 8 -- The Shanghai Stock Exchange has sent a letter to Kweichow Moutai asking why the world's largest liquor maker has set up a wholly-owned marketing unit.

The subsidiary's formation triggered concerns from investors regarding the company's internal management and prompted falls in the Guizhou-based firm's share price yesterday and the day before. The stock [SHA:600519] traded 0.82 percent higher at CNY897.30 (USD133.23 ) at the lunch break today.

The SSE has ordered that the company explains the reason and specific business model of the unit, pointing out that investors are concerned that it could take over the listed company's sales quota and generate large-scale revenue independently for the parent firm.

The regulator also asked for clarity on the relationship between marketing channels and the new subsidiary, as well as future distribution plans for sales channels, including the group's marketing channels, its own direct sales channels and distributor channels.

Set up on May 5, Moutai Group Marketing will focus on expanding direct sales of liquor, reducing intermediate sections and avoiding excessively high prices caused by dealer speculation, according to Li Baofang, chairman of the group.

Moutai is often in short supply on the market with tight sales quotas in recent years so investors suspect that the listed firm may transfer profits to its parent company via the unit.

Shares fell 7 percent on May 6, and another 1.8 percent yesterday. 

The State-Owned Assets Supervision and Administration Commission of Guizhou is the actual controller of Kweichow Moutai with a 61.2 percent stake. 

Editor: William Clegg