EconomyFebruary 15, 2013
Ghosts at the feast
Takings at hotels and restaurants are down. Blame Xi Jinping
Last week Zhou Shaoqiang was suspended from his post to allow for a period of ‘self-reflection’. As punishments go, it doesn’t sound too harsh. But in the current climate it could prove a devastating blow to his career. Zhou is general manager at the state-owned firm Zhuhai Financial Investment Holdings and his transgression was to host a banquet – a rather lavish one, it seems. Unfortunately for him, photos of the event then appeared online, as well as estimates that the dinner had cost the public purse around Rmb80,000 ($12,831).
A subsequent investigation by Zhuhai’s anti-corruption body put the final bill at a lower amount: Rmb37,517 to be precise.
But the probe confirmed that Zhou and his colleagues got through a dozen bottles of rather select French wine, including a Mouton Rothschild, a Chateau Angelus and a Cos d’Estournel.
It was a photo of these bottles lined up that proved Zhou’s undoing. His timing could not have been worse. While bureaucrats have routinely gorged themselves in years past, new leader Xi Jinping has publicly attacked such cases of government waste. He has sought to set a personal example. On an official trip to Hebei late last year it was announced that Xi had eschewed a banquet in favour of a simple meal of four rustic dishes and a soup.
There are signs that Xi’s new policy is restraining some of the more lavish spending. In fact, for some segments of the economy the cutbacks are taking a heavy toll on business. One hit is to hotel and restaurant bottom lines. A report released last week by the China Cuisine Association reported that upwards of 60% of restaurants have seen banquet bookings cancelled since the austerity campaign was launched. The Beijing Youth Daily reports that one five-star hotel in the capital saw almost Rmb10 million in cancelled reservations for Chinese New Year dinners, while the Securities Times estimates that foregone dinners in the holiday season would see restaurant takings fall 20%. The Wall Street Journal also reported that caterers in Tianjin feared a 30% fall in takings compared to the same period last year.
Anecdotal evidence of the squeeze has also come out on Sina Weibo too, with a disgruntled state employee noting that the staff’s Lunar New Year banquet had been moved to KFC.
Another industry that is feeling the pinch: the liquor business. As we have reported on prior occasions (see WiC172 for an example), there is a strong correlation between official banquets and the sale of high-end baijiu, (strong, distilled grain wines). But the China Daily is reporting that sales of top liquors such as Kweichow Moutai and Wuliangye have “plummeted” in recent weeks, down about 50% on last year. Prices have fallen too, the newspaper says, with a single bottle of Feitian Moutai dropping from Rmb1,900 to Rmb1,400 as demand sags. The newspaper also reports that the two leading baijiu distillers have seen their share prices decline 21% and 19.3% respectively since last November (although an industry scandal involving Jiugui Liquor and plasticiser agent won’t have helped, see WiC174.)
Food and booze purveyors are not alone in feeling the chill. Jewellers and watch sellers have also been feeling the pinch. The South China Morning Post reported that Emperor Watch & Jewellery saw its stock fall 7.14% last Thursday as it became evident that the usual rush of Lunar New Year sales was unlikely to materialise. It gave a drop in purchases of showy gifts for bureaucrats as a contributing factor. Xinhua had earlier noted that TV and radio stations have been ordered not to air the usual ‘gift-giving’ ads to discourage the practice.
But another article from the state news agency reported that old habits die hard as far as the dining practices of many local officials were concerned. The problem, it ruminated, was the “cohort of pussyfooters” who have been trying to avoid detection by bringing in top chefs to deliver banquets surreptitiously in their staff canteens, or splitting their feasts into smaller get-togethers, which are harder to track. The new piece of advice “to eat quietly, to take gently and to play secretly” is now commonplace among China’s more extravagant officials, Xinhua noted disapprovingly.