China s restaurants race to the bottom in deflation hit economy

BEIJING - 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 a 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 (S$1.62) and four-person set meals at 99 yuan.

Expanding domestic demand is the top priority in 2025 for China’s rulers, looking to offset the impact of US 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.

In 2024, Mr An and his team dismantled 200 restaurants each month, or 270 per cent more than in the prior year, as the number of dissolved catering companies touched a historic high of almost three 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 per cent, sometimes even surpassing 15 per cent,” said Mr 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, Mr An said, as more smaller, low-overhead stores opened, such as drink shops and bakeries,