Amid the stagnant Chinese economy showing no signs of recovery, unlicensed bars operating in dwellings have surged, according to the Financial Times (FT). A consumption slump that began in the luxury sector is starting to spread to the market for general consumer goods such as alcohol.
FT introduced an unlicensed bar operating in an apartment near the Beijing Olympic Park, noting, "This bar is one of dozens of unlicensed bars that have emerged across Beijing after Chinese consumers, sensitive to expenditure due to domestic economic stagnation, turned away from pricier established bars."
FT explained that unlicensed bars operating from dwellings do not pay for liquor licenses, resulting in lower operating expenses compared to established bars. The previously mentioned unlicensed bar sells unique cocktails at half the price of those at existing bars in Beijing.
Beijing once reflected China's economic boom, with a plethora of upscale restaurants and bars. However, the economic situation for those in the industry has worsened, exacerbated by increased regulations from the Chinese government across various sectors, including real estate, information technology, and education, which significantly impacted high-end restaurants and bars that relied on this clientele.
According to the Beijing Statistics Bureau, last year's profits in the food service industry decreased by 81% compared to the previous year. In the first quarter of this year, it recorded a deficit of 52 million yuan (about 9.9 billion won). Although this is a smaller deficit than the 454 million yuan (86.8 billion won) reported during the same period last year, it still remains in the negative. Overall revenue in the food service sector has continued to decline.
Wang, the representative of a bistro specializing in Yunnan cuisine, said, "Our main clientele consisted of those in the real estate, finance, film, advertising, and media industries," adding, "They have either reduced their expenditure due to declining income or stopped visiting altogether, opting for other alternatives."
Ultimately, businesses unable to cover fixed expenses through sales have emerged, leading to the rise of unlicensed bars. These businesses can maintain a 'low-price selling' model due to their lower fixed expenses, making it easier to attract customers with lighter wallets.
Dorothy, who operates an unlicensed bar in an apartment in a northeastern IT corporate area of Beijing, said, "People want parties and socializing, but nightclubs are too expensive," noting that young workers in their 20s from nearby companies frequently visit. This bar offers unlimited whiskey and cocktails at 199 yuan (about 38,000 won) per person.
However, as an unlicensed bar, there are several operational challenges. While not as costly as other bars, there are still significant expenses for rent and interior design, and the risk of being caught by public security is present. Ken, an operator of an unlicensed bar in the Olympic Park area, mentioned that a bar run by a couple was shut down due to a crackdown, and they feared further enforcement and have not reopened.
FT stated, "The spread of illegal bars serves as a reminder that the world's second-largest economy, China, had already seen household consumption weaken even before this year's trade war with the Donald Trump administration," adding, "Citizens are increasingly favoring cheaper options such as takeout or cooking at home instead of dining out."