China’s dining industry faces unprecedented challenges as economic pressures lead to the closure of three million restaurants in 2024. This unprecedented downturn has raised alarms about consumer confidence and the sustainability of the food sector.
The restaurant sector, a significant pillar of China's consumption-driven market, was already grappling with a fragile state, but by early 2024, the combination of declining consumer confidence and increasing operational costs triggered a cascade of closures. Data from the companies registry Qichacha reveals that the number of dissolved catering companies reached almost three million nationwide in 2024, marking a historic high.
Businessman An Dawei, who operates in the used kitchen equipment market, paints a grim picture from a warehouse on the outskirts of Beijing, where he inspects rows of commercial ovens and fridges, remnants of failed dining establishments. He states, “For the average person, opening a restaurant is almost a guaranteed failure.” Indeed, his team dismantled about 200 restaurants each month in 2024, a staggering 270 percent increase from the year before. In major cities like Beijing, Shanghai, and Guangzhou, the monthly closure rate exceeded 10 percent, often exceeding 15 percent.
This harsh decline is attributed largely to creeping deflation, which has shrunk consumer spending power since January 2024. After lifting pandemic restrictions, an influx of new restaurateurs entered the market, drawn by the hope of a V-shaped economic recovery. Instead, they found themselves in a battleground marked by fierce price wars. With coffee priced at 9.9 yuan (approximately $1.40) and family meal deals at 99 yuan ($14), competition has driven many to the brink.
One bakery franchise near Beijing’s Olympic Park exemplifies the struggles; its manager attributed its shuttering to unsustainable rent of 50,000 yuan per month and insufficient foot traffic. “Normal people will basically buy the cheaper product,” the manager noted, highlighting the impact of pricing wars where even subpar products can attract frugal consumers.
This relentless competition has led to significant declines in profit margins. Reports indicate that net restaurant profits plummeted 88 percent in the first half of 2024 in Beijing alone. “Mid-range enterprises are more likely to go bankrupt... because they are not cost-effective,” remarked food industry analyst Zhu Danpeng. Restaurants that charge between 100 to 120 yuan per person are particularly vulnerable to failure.
The realities of running a restaurant in China's current climate expose the stark economic divides affecting consumers. With a reported decline in consumer inflation, many people remain reluctant to spend. Analysts have stated that the average lifespan of a restaurant in China is only about 500 days and can be as low as 365 days in urban areas like Beijing.
This turbulent environment has not only led to job losses within restaurants but might also impact associated sectors like food supply logistics as businesses cut operational costs. An Dawei explains, “Once (restaurants) can’t lose money anymore, they will find ways to make a profit, and they can only do that by reducing the quality of ingredients.”
The Chinese government has prioritized boosting domestic demand to counteract the effects of US tariffs and alleviate the ongoing property crisis. However, with the restaurant sector in turmoil, it highlights deeper structural issues within the economy that could take years to resolve.
As the economic ripples extend from the dining industry to broader sectors, policymakers face mounting pressure to address the challenges of deflation and consumer hesitance. The hard-won reputation of restaurant vibrancy as a hallmark of urban areas is at risk, emphasizing the need for decisive action to restore consumer confidence and stabilize the economy.
In a time where affordability has become a paramount concern, the viability of even the most ambitious culinary dreams hangs in the balance. Experts warn that the unfolding story of China's dining scene reflects a crucial moment for understanding the health of its larger economic landscape.
