By Ye Lin (叶林), Li Li (李丽) and Chen Yong (陈勇)
Issue 612, Mar 25, 2013
News, page 1
Translated by Chi Yi
Original article: [Chinese]

"The Xidan branch is now the biggest headache!" Yin Su (訚肃), vice president of X.E.Flavour group (湘鄂情集团股份有限) moaned as he took a drag of his cigarette.

In his left hand he held a thick stack of staff performance evaluation forms and was yelling at a manager standing nearby.

"How can they get such high commissions? We must put caps on their incomes!" 

Yin then suddenly remembered that we were in the room too and reined himself in. "They are well paid, you know. We have a poor economy now. We need to protect the interests of our shareholders."

X.E.Flavour is a listed catering business and Xiangeqing (湘鄂情) is one of its high-end restaurant brands. The restaurant chain's sales had already started to decline in 2011, but the real turning point came at the end of 2012.    

"Business is so bad sometimes that some days we won't hold a single banquet," Ye Jianing (叶佳宁), deputy manager of a key branch of the restaurant in Beijing, told the EO. 

To get a sense of how good business used to be, consider how on Dec 26, 2010, that branch in Xidan, one of the capital's major shopping districts, managed to achieve more than a 1 million yuan turnover.

New Era of Austerity

On Dec 4, 2012 the Politburo of China's Communist Party adopted eight measures aimed at improving official work by reducing bureaucracy and extravagance. Among the measures were orders to reduce the amount traffic restrictions put in place to allow official cars to pass, shorter meetings and briefings and simpler official receptions.

These measures significantly impacted businesses that rely on spending by officials, including high-end restaurants, hotels, baijiu and jewelry. 

High-end restaurants in Beijing have reportedly suffered a 35 percent decline in profits since the new measures were announced. 

Wu Shaoyuan (武少源), vice chairman of the Alliance of China Conference Hotels, told the EO that the peak season for conferences in China is from December to January. 

"There's this phenomenon of government departments spending big before the end of the year, as the departments can't keep the money they haven't spent,” Wu said. “As a result, we have all kinds of commendation meetings, summing-up conferences and social gatherings."

There are now rumors that many of the high-end hotels in Beijing's Financial Street (金融街) are being monitored by the relevant authorities. If the companies want to invite officials to dinner they'll often take them out past the city's 4th Ring Road to avoid being detected. 

Restaurants like Xiangeqing used to benefit a lot from their locations. 

Meng Kai (孟凯), the founder of Xiangeqing, chose to locate his first restaurant across the road from a facility tied to the Chinese Navy and close to other central government departments and party organs.

"Focus on serving people from the military, keep away from shopping malls,”  Meng once said while describing how his company chose to locate a restaurant. “When the type of people going to the restaurant becomes more varied, officials will no longer be willing to come." 

Xianggeqing's New Strategy 

Xiangeqing has already started to change its approach. On Feb 26, Meng Kai unveiled the restaurant's new "family dining rooms" which are aimed at catering to the general public. 

"The market has changed and so should the enterprise," Yin Su said. "Those restaurants that already targeted families haven't been affected by the new measures."  

Ye Jianing said she and other staff were trying to adapt to the change. In the past, the people they waited on tended to wear dark suits, but now many of their customers are middle-class families. Ye told the EO that "It's more difficult." 

The dwindling number of big spenders also means that the menu has had to change. Very expensive seafood dishes have been removed and the 15 percent service fee has also been done away with. 

"That some high-end restaurants are coming down to earth is a positive trend,” said Su Yong (苏勇), a professor from the School of Management of Fudan University. “If companies that relied on government spending in the past can now smoothly switch to meeting the needs of the common people and find their own position in the market, then here is still space for development."

However, in terms of the government's new measures, Professor Su is not optimistic. "Every government talks about restricting "public consumption" but the problems remain. This government just took office. Let's wait for a while to see the outcome."

One Door Closes, Another Opens

Huang Huahua - not her real name - is the customer-service manager for a private club. One of her duties is to explain the precise location of the club to new customers, as much of its appeal is in the fact that it's not easy to find.

According to Ms. Huang, business at the club has picked up since the party launched the eight measures. 

"We have two separate lifts on both sides of the club. You definitely won't be found if you come here. Customers from all the various ministries and departments come here to eat.”