by Sophie Yu and Yew Lun Tian

BEIJING (Reuters) – In Beijing, at the restaurants of the Nanchengxiang chain, customers can enjoy breakfasts consisting of three types of rice soups, hot and sour soups and milk for the unbeatable price of 38 cents a day. euros.

“Many choices, good markets have appeared during the pandemic (…) There are new bargains all the time, you just have to know how to find them”, underlines Gao Yi, 71, who came for breakfast with his grandson in one of the 160 restaurants of the chain located in the Chinese capital.

The 38-cent breakfasts illustrate the deflation that is hitting China.

Restaurant owners compete with low prices and good plans to attract consumers who have less appetite than in the past.

Observers worry that such a race for low prices could threaten small businesses, unable to compete with the aggressive promotions of large groups in the sector.

Like deflation in Japan in the 1990s, economic growth could be threatened.

“Good plans are necessary to attract customers and therefore there is a lot of pressure on these businesses to find margins,” said Ben Cavender of China Market Research Group in Shanghai.

Unlike their Western counterparts, the Chinese had to fend for themselves financially during the outbreak as the government prioritized subsidizing the manufacturing sector. Once the restrictions were lifted, there was no consumerist wave as hoped by some economists.

With wages and benefits barely rising and a saturated labor market, Chinese consumer spending is constrained by a stagnant economy.

“Strategies of lowering prices, offering consumers better value for money choices correspond to the current economic situation,” said Zhu Danpeng, vice president of the provincial Food Safety Promotion Alliance of the province. Guangdong (southeast).

In Beijing, the restaurant of the Nanchengxiang chain was packed Thursday, as it has been every morning since the company began offering meals at 38 cents in May, according to staff.

Nanchengxiang did not respond to requests for comment from Reuters.

Xishaoye, a burger chain based in the Chinese capital, also lowered its prices, offering products at 10 yuan (1.26 euros). Yum China, which operates KFC’s restaurants in China, attracts consumers by offering menus at 19.9 yuan (2.50 euros).

“People are back but spending per consumer is down,” Yum chief executive Joey Wat told Reuters.

“In our minds, the pandemic seems like a very long time ago, but it’s not,” he continues.

Dong, a restaurant worker who declined to give his surname, went to a market in Beijing midday on Thursday but did not buy anything.

“I have a mortgage and a child. I have no choice but to be more careful,” he says.

( Zhifan Liu, edited by Kate Entringer)

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