In Depth: Restaurants Suffer as Crackdown on Officials’ Indulgence Goes Into Overdrive
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China’s food and beverage industry is feeling the pinch since the top leadership updated its austerity rules in May. Photo: AI generated
Summer is usually peak season for barbecue in Northwest China’s Shaanxi province, but Song Yang’s sprawling 1,000-square-meter restaurant is eerily quiet.
Why? The problem isn’t a lack of appetite, it’s fear. Fear of government inspectors enforcing China’s new crackdown on civil servants overindulging themselves. Song described how inspectors recently turned up at his restaurant with cameras to ensure no government or state-owned enterprise employees were dining there.
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- Strict enforcement of new government austerity rules in China has caused restaurant revenue to drop, with catering revenue rising only 0.9% year-on-year in June and alcohol/tobacco sales falling by 0.7%.
- More than 1,400 high-end restaurants in Shanghai closed between May 2023 and July 2024; premium baijiu prices also fell, with Feitian Moutai dropping below 2,000 yuan per bottle.
- The crackdown is forcing businesses to reconsider models, with impacts rippling across restaurants, liquor, and tobacco vendors nationwide.
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Who’s Who
- Kweichow Moutai Co. Ltd.
- Kweichow Moutai Co. Ltd. (600519.SH) is China's leading state-backed baijiu-maker. Following new austerity rules, they reportedly swapped their signature Feitian Moutai for blueberry juice at a buffet dinner. The wholesale price of Feitian Moutai has subsequently dropped, reflecting a broader downturn in the baijiu industry.
- Jiangsu Yanghe Distillery Co. Ltd.
- Jiangsu Yanghe Distillery Co. Ltd. (002304.SZ) is a Chinese baijiu producer. Facing new austerity rules impacting official consumption, the company is pivoting its strategy. Its former chairman, Zhang Liandong, stated in June that the company will now focus on mainstream, youth-oriented, and business consumption, alongside accelerating international expansion.
- Shanxi Xinghuacun Fen Wine Factory Co. Ltd.
- Shanxi Xinghuacun Fen Wine Factory Co. Ltd. (600809.SH) is a baijiu producer based in Shanxi province, a major baijiu production hub in China. In June, its chairman, Yuan Qingmao, stated that the company's priorities for the year include exploring younger markets and international expansion.
AI generated, for reference only
What Happened When
- 2013：
- China’s top leadership issued rules banning high-end dishes and premium alcohol at official meals, and prohibited use of private clubs and lavish restaurants for government receptions.
- Between May 10, 2023 and July 21, 2024：
- Over 1,400 high-end restaurants (average spend > 500 yuan per person) closed in Shanghai.
- Start of 2024 to May 2025：
- Monthly average price of mid-to-low-end and high-end baijiu decreased by over 7% and 4%, respectively.
- May 2025：
- China’s top leadership updated austerity rules banning Communist Party and government officials from consuming luxury dishes, tobacco, and alcohol during work-related meals.
- May 19, 2025：
- Kweichow Moutai Co. Ltd. replaced Feitian Moutai with blueberry juice at a buffet dinner held ahead of a shareholders’ meeting, the day after the alcohol ban.
- Late May 2025：
- Song Yang’s restaurant business plummeted by two-thirds due to fear among government and SOE employees of being caught violating new regulations.
- June 2025：
- Alcohol and tobacco sales in China fell by 0.7% year-on-year, reversing from 11.2% growth in May 2025; catering revenue grew by only 0.9%, the slowest rate since 2023.
- June 2025：
- The average wholesale price of Feitian Moutai slipped below 2,000 yuan.
- June 2025：
- Jiangsu Yanghe Distillery Co. Ltd.’s annual shareholder meeting discussed pivots in market strategy due to new austerity rules.
- June 2025：
- Shanxi Xinghuacun Fen Wine Factory Co. Ltd. stated company priorities for 2025 at an earnings conference in light of new policies.
- June-July 2025：
- Local authorities across China intensified inspections for violations of the updated austerity rules.
- June 17, 2025：
- People’s Daily published a commentary criticizing excessive restrictions by local officials relating to the new dining crackdown.
- July 3, 2025：
- A magazine run by Liaoning province’s party committee clarified permissible dining activities under the new rules.
- By July 2025：
- Song Yang is considering layoffs if business conditions do not improve.
AI generated, for reference only
- CX Weekly Magazine
Jul. 18, 2025, Issue 27
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