Ken and Dolores’s unlicensed Beijing bar lies behind an unmarked door in a gritty residential tower where a rowdy group of men play cards in the foyer.
In the converted apartment in Beijing’s Olympic Park area, Ken, a civil engineer by training who asked to be identified by his English nickname, serves quirky cocktails at prices half or even less of those charged by the Chinese capital’s conventional drinking establishments.
The couple’s “homebar” is one of dozens that have sprung up across the city as a domestic economic downturn drives cost-conscious consumers to desert more expensive traditional alternatives.
Their proliferation is a reminder that the world’s second-largest economy was already suffering from weak household consumption even before US President Donald Trump this year launched his trade war against it.
“The catering business overall is very bad,” said Dolores, who by day works at an online tutoring company and also preferred to only use a nickname.
That was why the couple set up their Chinese speakeasy, which has lower overheads since it does not pay licence fees, she said, patting the bar’s only other “employee”, a sociable cat named Hulu. “There aren’t many bars making money in Beijing.”
Beijing’s high-end restaurants and bars once showcased the glittering prosperity of China’s economic miracle. But government crackdowns on the property, internet and education sectors have hit urban middle-class employment and salaries and depressed sentiment.
In the financial industry, brutal government salary cuts and bonus clawbacks — some of them retrospective — have further undermined confidence.
This has taken its toll on the city’s catering sector, where profits last year fell 81 per cent year-on-year, according to the Beijing Municipal Bureau of Statistics. In the first quarter of this year, the industry lost Rmb52mn ($7mn), better than last year’s Rmb454mn loss during the same period, but still negative. Overall sales continued to fall during the period.
“Our main clientele used to be from the real estate, finance, film, advertising and media-related industries,” said Wang, a restaurateur at a bistro specialising in China’s south-western Yunnan cuisine who asked to be identified only by his surname. Today “this group either spends less, has stopped coming altogether, or opted for other alternatives”.
The pain was being felt across the catering industry, Wang Puzhong, chief executive of home delivery service Meituan’s local business, told a conference in September.
“We’re facing the biggest change in China’s restaurant industry in 30 years,” Wang said.
The government has this year signalled it wants to stimulate domestic consumption, and Xi Jinping has met private sector entrepreneurs in a sign that the crackdowns are over. But the message has not yet filtered through.
One co-owner of a restaurant chain in Beijing said part of the problem was an exodus from the capital of wealthy and young people seeking jobs or better opportunities elsewhere.
Customers were also downgrading to more discount options, with some choosing takeaways or to cook at home rather than eat out.
At the same time new malls packed with restaurants were opening, compounding an oversupply of eateries and exacerbating cut-throat competition, the co-owner said.
“Restaurants with higher average spend are getting hit harder,” they said. “There is the double whammy of deepening overcapacity and consumer tightening.”
An owner of high-end Japanese fusion restaurants in Beijing said they used to average Rmb5,000 per meal, but this had dropped by about half. Previously, each restaurant would open 15-20 bottles of wine a day for about Rmb1,000-Rmb2,000 each; now a “good day” would be four to five bottles at Rmb500-Rmb800.
Former customers in the finance and internet sectors were having “a very tough time”, with incomes down about 40-70 per cent, he said. “Customers today, especially in the middle class, are now seeking high value for money, so they are not willing to spend money on dining.”
Another restaurant owner, who runs a small bistro in Beijing’s upmarket Sanlitun area and asked to be identified only by his surname Cao, said his customers had largely stopped ordering wine by the bottle.
“And when ordering by the glass, customers might also pay more attention to the price.”
The troubles of Beijing’s formal sector restaurants have led some hospitality entrepreneurs to turn to illicit homebars.
The bar at one well-appointed apartment in north-east Beijing near the offices of large domestic internet companies and German carmakers offers all-you-can-drink whisky and cocktails for Rmb199 per person — cheap compared to high-end bars that offer a similar personalised atmosphere.
“People have the need to party and socialise, but night clubs are so expensive,” said co-owner Dorothy, who cheered along a group of young men from an internet company who were playing a drinking game.
Her business partner, whose surname is Yang and whose day job is at one of the German carmakers, said he was inspired by his college days in Germany, when students held house parties — which are uncommon in China.
“It’s a space where people can socialise and have house party-like gatherings,” he said of the homebar. “Most of our customers are in their early 20s. They work at companies nearby.”
The partners run special “matchmaking” nights to help young people meet in a society where romance is on the decline — 57 per cent of college students expressed no interest in relationships in a survey published by health commission newspaper China Population Daily last year.
But Yang admitted the bar’s informal status and unusual location made it challenging to attract single women, and even with its lower costs, the business was a financial slog.
“We are far from making any money . . . the rent and decoration cost a lot and at the moment we only open once or twice a week.”
Police crackdowns were also a constant risk, said Ken in the Olympic Park homebar, where cocktails include the “Hotpot Coffee”, inspired by the traditional Chinese dish, and the Halloween-themed “Zombie”.
Ken cited the experience of another couple who were running a homebar but were questioned by police after being reported by neighbours. “They were too terrified to open up again,” he said.
