A record three million food service establishments will go out of business in China in 2024, Reuters reports, as restaurants enter a bitter price war amid an economic slowdown and falling consumer spending.
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What is known
“For the average person, opening a restaurant is almost a guaranteed failure,” An Dawei, a 38-year-old businessman who sells used kitchen equipment, told the publication.
According to the Qichacha company registry, An's team dismantled 200 restaurants every month last year, up 270 percent from the previous year. “In first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen, the monthly restaurant closure rate exceeds 10 percent, sometimes even 15 percent,” the businessman said.
According to Reuters, many restaurateurs have sunk all their savings since the COVID-19 pandemic. They were counting on a V-shaped economic recovery. However, consumers have been cutting back on eating out as China's economy slows.
China's consumer inflation fell so fast in February that it raised fears of a deflationary spiral, the agency said. Restaurants are offering coffee for 9.9 yuan ($1.40) and set meals for four for 99 yuan ($14).
Food industry analyst Zhu Danpeng told the agency that mid-priced businesses are most susceptible to bankruptcy. These are establishments where meals cost 100-120 yuan ($13-16) per person.
Beijing data shows that net profits for restaurants fell 88% in the first half of 2024. The average length of time a restaurant in China operates is only about 500 days, the agency notes. In Beijing, that figure drops to one year.
A manager at a bakery franchise in a deserted mall near Beijing's Olympic Park told Reuters the reasons for the closure. “People just don't have money. And if they do, they don't want to spend it like they used to because it's hard to earn,” he said, speaking on condition of anonymity.
Expanding domestic demand is the top priority for Chinese authorities this year to offset the impact of US tariffs and a protracted housing crisis, the agency writes.
Earlier, a similar problem was reported in Argentina, where the strengthening of the peso also led to a decrease in visits to restaurants and cafes. Argentines and tourists began to visit food establishments less often due to a sharp increase in prices caused by the economic reforms of President Miley.
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