Chinese spirits group Sichuan Swellfun Co. has said it is not in sale talks with Diageo - but said it was in talks with the company on "business co-operation".

According to a statement on the Shanghai Stock Exchange, Swellfun "has been in touch with several international liquor companies, including Diageo, on business cooperation, such as helping us sell products overseas".

Swellfun released the statement after reports claimed that Diageo was in advanced talks to buy the company.

Swellfun added: "We haven't reached any agreement yet and haven't been in talks on an acquisition."

A Diageo spokesperson refused to comment on Swellfun's statement.

However, the UK drinks giant is looking at bolstering its presence in China after watching arch-rival Pernod Ricard gain a march with its stable of premium spirits, including Chivas Regal Scotch Whisky and Martell Cognac.

Just-drinks understands that Diageo has held low-level talks with a number of domestic Chinese spirits groups on the prospect of possible co-operation, though nothing concrete has been finalised at this stage.