The closure of a popular seafood restaurant chain in southern China is casting light on the problems Chinese companies have with cash flow in a slower economy.
The closure of the Ren Ren Hai Xian (the name translates roughly to People’s Seafood or Popular People’s Seafood), which operated four outlets in Fuzhou city, on China’s southeast coast, also highlights problems seafood restaurants have keeping pace with China’s rising rents, caused by a frothy property market that many economists categorize as a bubble.
Located in the historic Workers Cultural Palace, the main outlet of Ren Ren Hai Xian opened in 2014 as a “reasonably priced” restaurant catering to a buffet trade, with modern décor and a mix of shrimp and fish dishes. Fuzhou is the capital of Fujian Province, which is one of China’s leading producers of shrimp and farmed whitefish.
Creditors and workers speaking to local Fuzhou TV station outlined how a CNY 200,000 (USD 29,595, EUR 26,686) monthly rent on the Workers Cultural Palace outlet (consisting of 3,000 square meters on three floors) was too much for the Ren Ren operator, the Di Yuan Group. The group, which also runs a number of cafés in the area, prides itself on an ability to create “brand-oriented” hospitality businesses that targeted the country’s young consumers.
An anti-corruption crackdown that was initiated by China’s central government in 2012 has pressured many high-end seafood restaurants in China to adapt their offerings to a middle-priced market, with seafood buffets becoming particularly popular in the past two years. However, managing cash flow is a major problem for private enterprises in China, noted Yao Yang, an economics professor at Peking University. Another important factor in the recent struggles of the hospitality sector is the emergence of alternative investment opportunities, such as education, health and tourism, according to Yang.
