The basics of drinking baijiu are simple. In China baijiu is traditionally served neat and at room temperature. One drinks it at mealtimes in the company of others, usually through a series of communal toasts followed by shots from diminutive glasses.
The social component is more complex. Drinking in China is an elaborate art with rules that originate thousands of years ago. Once, a breach of drinking etiquette could result in reprimand, even execution. Today the punishments are more relaxed—arriving late can result in a three-shot tax—but knowing the rules of engagement are essential to demonstrating respect.
The Do's When Drinking Baijiu

Drinking is communal, take care of your comrades.
To do less would be considered stingy and inhospitable.

Always drink with a greater purpose in mind.
When someone honors you with a toast, best to return the favor rather than risk offense. (But be safe!)

Keeping the lip of one’s drink lower than another’s when clinking glass demonstrates respect. Expect them to undercut you in a literal race to the bottom.
They say "ganbei" (dry the glass) for a reason.

The Dont's When Drinking Baijiu

In China it is impolite to drink by yourself. Nobody drinks alone, except for the poet Li Bai. He gets a pass.
A host or the guest of honor sits in the seat with the best view of the door. In this way she can better follow the comings and goings. The seats flanking this seat are next-most coveted, and so forth. If you are in doubt, wait for the host to indicate a seat.

The host will usually make the first one to three toasts. After the third toast, anyone at the table may toast anyone else.
Whoever buys the drinks calls the shots. Take your cues from the head of the table.

Better to give no toast than to phone one in.
In China there is no social stigma attached to indulging at the drinking table. The host’s job is to give you as much as you want. Your job is to enjoy yourself.