In a dilapidated warehouse near the Chinese capital, businessman An Dawei inspected rows of giant refrigerators, industrial hobs and commercial bread ovens waiting to be resold to dining establishments.
“For an ordinary person, opening a restaurant is almost a failure,” said the 38-year-old, who sells used kitchenware.
Behind every appliance is the story of a failed Beijing restaurant, often set up by those betting their life savings on a V-shaped economic recovery after the COVID-19 pandemic, as consumers forgo eating out as China’s economy slows.
A price war broke out, with eateries charging 9.9 yuan ($1.40) for a cup of coffee and 99 yuan ($14) for a meal for four.
Boosting domestic demand, which is expected to offset the impact of U.S. tariffs and a protracted property crisis, has been a priority for China’s rulers this year.
But consumer inflation fell in February at the fastest pace since January 2024, raising concerns about a deflationary spiral.
Last year, An and his team closed 200 restaurants each month, up 270% from the previous year, bringing the number of food service businesses closed nationwide to a record high of nearly 3 million, according to data from the company registrar Qichacha.
“In first-tier cities like Beijing, Shanghai, Guangzhou and Shenzhen, the monthly restaurant closure rate is over 10%, sometimes even 15%,” An said.
At restaurants closing across the capital, his teams of workers piled up chairs, ovens, storage units and baking trolleys, some of which were loaded onto pickup trucks, and at one point a buyer took away the tables.
An said the company’s revenue fell by a little more than a fifth in 2024 as smaller, lower-end stores like liquor stores and bakeries opened, requiring less equipment.
In a deserted shopping mall near Beijing’s Olympic Park, the manager of a bakery franchise blamed the high rent of 50,000 yuan ($6,900) a month and low foot traffic for its failure after 14 months.
“There are stores nearby that have similar products that don’t taste as good but are 10 yuan cheaper. Ordinary people will basically buy the cheaper product,” the manager said on condition of anonymity.
“People don’t have money. Or if they do, they don’t want to spend as much as they used to because it’s so hard to find.”
Analysts say the average lifespan of a restaurant in China is about 500 days, and in Beijing it has fallen to less than a year. City data shows net restaurant profits fell by 88% in the first half of 2024.
“Mid-range businesses are more likely to go bankrupt … because they are not profitable,” said food industry analyst Xu Danpeng, referring to restaurants that charge 100 to 120 yuan ($13 to $16) per person.
Fierce competition on price and constantly changing menus to attract weary customers have left many establishments struggling to survive, An said, with many forced to cut their costs per customer to 70 to 80 yuan ($9 to $11).
Chinese officials pledged to do more to crack down on “invasion,” or excessive competition, during a major legislative session this month, but the restaurant industry is one of the areas where the problem is most visible.
Many restaurants went out of business in 2024, and revenue growth in China’s food and beverage industry slowed only slightly to 5.3% from 20.4% in 2023. Those that survived had to cut profit margins dramatically to stay in business.
The price war that erupted after China lifted pandemic restrictions lasted into 2023, he said, and led to an influx of newcomers into the restaurant industry, following massive layoffs in industries such as real estate, education, finance and technology.
The vicious cycle of competition will ultimately cost consumers, An added.
“Once (restaurants) can no longer afford to lose money, they will find ways to make a profit, and they can only do that by reducing the quality of the ingredients,” he said.
