By Laurie Chen, Tingshu Wang and Xiaoyu Yin
BEIJING (Reuters) – In a dilapidated warehouse on the outskirts of the Chinese capital, businessman An Dawei inspected rows of giant fridges, industrial hobs and commercial bread ovens waiting to be resold to dining establishments.
“For the average person, opening a restaurant is almost a guaranteed failure,” said the 38-year-old who sells used kitchen equipment.
Behind every appliance is the tale of a failed Beijing restaurant, set up by those who often bet their life savings on a V-shaped economic recovery after the COVID-19 pandemic, only to see consumers skimp on eating out as China’s economy slowed.
That unleashed a price war in which food providers are offering coffees at 9.9 yuan ($1.40) and four-person set meals at 99 yuan ($14).
Expanding domestic demand is the top priority this year for China’s rulers, looking to offset the impact of U.S. tariffs and a protracted property crisis.
But consumer inflation fell in February at the quickest pace since January 2024, setting off concerns about a deflationary spiral.
Last year, An and his team dismantled 200 restaurants each month, or 270% more than the prior year, as the number of dissolved catering companies touched a historic high of almost 3 million nationwide, data from companies registry Qichacha shows.
“In first-tier cities like Beijing, Shanghai, Guangzhou and Shenzhen, the monthly restaurant closure rate exceeds 10%, sometimes even surpassing 15%,” said An.
At restaurants closing across the capital, his teams of workers stacked chairs, ovens, storage units and baking trolleys, using forklifts to load some on to vehicles to be taken away, while at one site a purchaser carried away tables.
The company’s revenue fell by just over a fifth in 2024, An said, as more smaller, low-overhead stores opened, such as drink shops and bakeries, which need a smaller outlay on equipment.
In a deserted mall near Beijing’s Olympic Park, the manager of a bakery franchise blamed high rents of 50,000 yuan ($6,900) per month and low foot traffic for its failure after 14 months.
“There are shops next door with similar products that don’t taste as good, but are 10 yuan cheaper. Normal people will basically buy the cheaper product,” said the manager, who spoke on condition of anonymity.
“People just have no money. Or if they do, they’re unwilling to spend like before, because it’s so hard to come by.”
VICIOUS CYCLE
A restaurant in China has an average lifespan of just about 500 days, analysts say, falling to as low as a year in Beijing, where municipal data show net restaurant profits plunged 88% in the first half of 2024.
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