Belt tightening has had a salutary effect on industry, expert says

People from South China like to drink foreign spirits, just like the people in North China like Moutai (a leading luxury brand of the traditional Chinese liquor baijiu). [Photo provided to China Daily]

Three years after the Chinese government declared war on the misuse of public funds on meals, travel and in other areas, knocking the stuffing out of the catering industry, fresh life seems be coming back to the business.

This new vitality appears to be due mainly to activity in the medium to low end of the industry.

In the first nine months of this year revenue in catering grew 11.7 percent to 2.3 trillion yuan ($317 billion) compared with the corresponding period last year, the first double-digit growth since late 2012, the China Cuisine Association says.

Significantly, too, high-end restaurants, or restaurants charging more than 200 yuan a head, have turned the corner, their revenue growing 8.6 percent over the two months from August to September compared with the same period last year, says Feng Enyuan, vice chairman of the association.

Feng attributes the revival to the fact that while government strictures on lavish public spending continue to have an impact on upmarket restaurants, many have heeded advice to adopt new business models to broaden their customer bases.

"The strongest momentum that lies behind these promising figures is that more and more restaurants, at both ends of the market, have realized the market potential among average people," Feng says, adding that dining out frequently is becoming more affordable for people as the economy grows.

"People used to go to restaurants mainly on special occasions, but they're now dining out either because they can't be bothered cooking, or simply because they want something other than home-cooked meals."

On such occasions, diners are more sensitive to taste and price, since they pay out of their own pockets, Feng says.

While a few upmarket restaurants are unwilling to adapt to the new consumer environment and so are struggling to survive, most have adopted various strategies to reach lower-end customers, Feng says.

This includes reducing prices, establishing cheaper junior brands, providing corporate catering, and using the Internet to bring in diners.