We study X-ray spectra of Cyg X-3 from BeppoSAX , taking into account absorption and emission in the strong stellar wind of its companion . We find the intrinsic X-ray spectra are well modelled by disc blackbody emission , its upscattering by hot electrons with a hybrid distribution , and by Compton reflection . These spectra are strongly modified by absorption and reprocessing in the stellar wind , which we model using the photoionization code cloudy . The form of the observed spectra implies the wind is composed of two phases . A hot tenuous plasma containing most of the wind mass is required to account for the observed features of very strongly ionized Fe . Small dense cool clumps filling \la 0.01 of the volume are required to absorb the soft X-ray excess , which is emitted by the hot phase but not present in the data . The total mass-loss rate is found to be ( 0.6– 1.6 ) \times 10 ^ { -5 } { M } _ { \sun } yr ^ { -1 } . We also discuss the feasibility of the continuum model dominated by Compton reflection , which we find to best describe our data . The intrinsic luminosities of our models suggest that the compact object is a black hole .