China’s Top Restaurants Reeling Over New Austerity

By Didi Tang 4 September 2013

BEIJING — The shark’s fin, bird’s nest and abalone are gone from the offerings at Beijing’s Xiang E Qing restaurant—a favorite of Communist Party cadres just months ago. Diners are now left with less exotic fare such as shredded beef, pickled turnip and fried peanuts.

China’s high-end restaurants have gone into crisis under leader Xi Jinping’s campaign to crack down on the kinds of party extravagances that have angered ordinary Chinese, such as dining on the public dime. To stem big losses and avoid the now-tarnished image of VIP banquet halls, these restaurants have been busy reinventing themselves.

“We don’t do high-end! We just serve family-style food!” a jittery manager at Xiang E Qing told a visitor who wanted to see the dramatic, near-overnight transformation of one of the capital’s most prestigious eateries.

The Xiang E Qing restaurant in downtown Beijing—part of a national chain that has been among the hardest hit—no longer has the expensive liquors, minimum spending requirements or special fees for the private banquet rooms where government officials and business executives once gathered in seclusion. Its calling cards have been rewritten to promote a joyful, family atmosphere.

Restaurants serving exquisite delicacies in banquet rooms long flourished under the lavish spending habits among all levels of public officials, who spent about 300 billion yuan ($50 billion) a year on food and drinks in recent years, according to state media. But new party rules since the beginning of this year curb spending on food and drink, and Xi himself has set the example by having a work meal of four simple dishes and one soup.

Some of that wining and dining has gone underground, with officials sprucing up private clubs and government canteens with pricey booze and fancy meals or ducking into secluded locales to avoid detection, according to state media who have sent undercover reporters.

Even so, China’s dining market has hit its lowest point in more than two decades—barring a brief industry collapse related to the 2003 SARS epidemic—and the high-end market had suffered the most, Commerce Ministry spokesman Yao Jian said last week.

To cope with the new reality, high-end restaurants are diversifying services to include fast food and take-out, or offering modestly priced homestyle dishes and hot pots with wider, common-folk appeal.

The anti-waste campaign promoted in state media has not been aimed solely at party cadres, but also at members of the public, urging them not to over-order and to clean their plates.

“We are all remaking ourselves,” said Han Fang, a manager at another high-end restaurant in Beijing. “We need to adjust to whatever the policies the country has.”

The Xiao Nan Guo restaurant in downtown Beijing specializes in elaborate Shanghai-style cuisine on white tablecloths with floral arrangements in private rooms behind thick, carved wooden doors. To attract more customers, it has revamped its menu to include new dishes priced under $15, said Zheng Yuming, the restaurant’s general manager.

Its parent company, national chain Xiao Nan Guo Restaurant Holdings Ltd. Group, reported a 43.3 percent decline in profits for the first six months of 2013, citing a slowing economy, bird flu and “the prolonged curb in lavish spending by Chinese government officials.”

At least Xiao Nan Guo stayed in the black.

Xiang E Qing fared much worse. The national chain reported a loss of $35 million for the first six months of the year, a steep plunge from a net profit of $12 million for the same period in 2012. It cited “national policies” and the downturn in high-end banqueting in its financial report, while noting that the “mass market is stable and rising.”

“The weakening business of the high-end restaurants is for sure related to the new rules, and at least in the next year, that won’t change or ease,” said Peng Xizhe, dean for the School of Social Development and Public Policy at Shanghai-based Fudan University. “The high-end restaurants which rely on public money have to find some other ways to work it out.”