Michelin stars lose their lustre in China’s slowing economy

On a weekend evening, I had dinner with friends from Shanghai who were visiting Singapore. Most restaurants in the malls at Orchard Road had long queues, and we waited for half an hour before we could get a table.

My friends lamented that it has been a while since Shanghai’s food and beverage (F&B) scene has seen such a sight. Even some Michelin-starred restaurants that used to require advance reservations, now accept walk-ins.

The Michelin Guide Shanghai 2025 was released last week, with a total of 145 restaurants making the list. As one of the highest benchmarks in the F&B industry, restaurants featured in the Michelin Guide would, in previous years, either quickly raise their prices or become nearly impossible to book after the guide’s release. Yet Shanghai restaurant Ultraviolet (UV), which maintained its three Michelin stars, announced the day after the guide’s release that it might close sometime in 2025.

As one of the only two three-Michelin-starred restaurants in Shanghai, UV has been known for its exorbitant prices and notoriously difficult booking process since its opening in 2012. The restaurant’s basic set menu costs 4,800 RMB (US$662) per person, while special menus can reach as high as 10,000 RMB. Coupled with the fact that the restaurant only accepts ten guests per day, diners are required to monitor the official website months in advance to secure a reservation. 

After news of UV’s potential closure spread on social media, some diners commented that they have been receiving frequent promotional offers from the restaurant this year. They have also noticed a growing availability of last-minute seats, suggesting that business has slowed significantly.

This is not the first luxury dining brand to exit the market this year, and neither is this trend limited to Shanghai. Beijing’s Opera Bombana, which had been featured in the Michelin Guide for three consecutive years, closed in April this year. Beijing’s Vege Wonder (山河万朵), a one-Michelin-starred vegetarian restaurant, also ceased operations in September. 

L’Atelier 18, a French restaurant helmed by a three-Michelin-starred chef, made its debut on the Bund in Shanghai in January this year, but abruptly shuttered in August, with employees revealing that the restaurant owed them wages and social security contributions.

Data from Canyin88.com showed that as of July this year, the number of restaurants in Shanghai that charge guests 500 RMB ($69) each declined by over 1,400 compared to May last year — a drop of more than 50%.

To survive in the increasingly involuted industry, several high-end restaurants have started to make themselves more accessible. 102 House, a two-Michelin-starred restaurant that charges an average of 1,800 RMB (US$248) per person, introduced a 498 RMB (US$68.7) set menu; Xin Rong Ji, a restaurant that used to charge 1,000 RMB (US$138) per person on average, launched a 398 RMB (US$55) set menu; while Cheng Long Hang, a one-Michelin-starred restaurant, offered a set menu for as low as 189 RMB (US$26). 

Amid a sluggish economy, corporate cost-cutting and consumption downgrading, luxury dining — which emphasises added value such as service and ambience — has not only been directly impacted by the decline in corporate dining, but also enjoys less popularity among the middle class than it once did.

In stark contrast to the predicament of luxury dining is the booming business of budget-friendly restaurants. Saizeriya, a Japanese chain restaurant where no dish costs more than 20 RMB, is now among the most profitable Western restaurants in China. In fiscal year 2024, the group had a total of 415 outlets across its Shanghai, Guangzhou and Beijing branches — an increase of 42 stores compared to the previous year. Total revenue in these three locations grew 27% year-on-year, with operating profit up 33%.

Is the food at Saizeriya delicious? With its incredible value — Western food for 20 RMB — taste becomes almost an afterthought. Even Western restaurant chain giant Pizza Hut has started to emulate Saizeriya. The fast-food chain recently launched a subsidiary brand Pizza Hut Wow, which similarly focuses on low-priced, pre-prepared dishes.

Undoubtedly, whether one chooses to dine at a Michelin-starred restaurant or at Saizeriya is a personal choice; there is no inherent superiority in either. But luxury dining serves as a weathervane for the F&B industry, which in turn functions as a barometer for the consumer market. In a market that can sustain luxury dining, mainstream dining often thrives even more, with stronger consumer willingness to pay and higher purchasing power. The opposite is also true.

After China lifted its Covid-19 restrictions at the end of 2022, the F&B industry experienced explosive growth, with its recovery pace significantly outpacing that of the retail sector. But following the consumption downgrading wave, the growth in F&B revenue has rapidly slowed this year, with even first-tier cities like Beijing and Shanghai experiencing declines.

While China’s retail sales saw a year-on-year growth of 4.8% in October, which exceeded expectations and marked the second consecutive month of increases, this is partly because the Singles’ Day sales started ten days earlier than last year. 

When broken down by consumption type, retail sales of consumer goods in October rose by 1.7 percentage points to 5% compared to the previous period. Year-on-year growth in F&B revenue for October rose by 0.1 percentage points to 3.2%, lagging behind the growth rate of retail goods for the second consecutive month, with the gap widening further.

In a recent article, Han Wenxiu, executive deputy director of the Central Committee Office for Financial and Economic Affairs, emphasised leveraging China’s large and diverse economy by focusing on expanding domestic demand to drive sustained economic growth. He proposed strengthening consumption’s role by creating a policy environment that encourages people to “want to consume, dare to consume, and be able to consume”.

However, although the standing committee of the National People’s Congress approved a ten trillion RMB debt relief package earlier this month, it focused on reducing local government debt risks and did not allocate direct financial support for boosting consumption, as the market had expected.

Indeed, only after local governments have reduced their debts can they promote local investment and consumption. However, this transmission process takes time and will not yield immediate results. Meanwhile, US President-elect Donald Trump, who threatened to slap 60% tariffs on Chinese goods, will be taking office in January next year. With internal worries unresolved and external threats looming, does China have enough time to boost domestic demand and withstand the impact of potential changes?

The next policy window the market will be watching is the Central Economic Work Conference in December. But this meeting, which aims to set the tone for next year’s economic goals and policies, generally does not unveil specific measures. The UBS macro team predicts that a new batch of measures will not be announced until the National People’s Congress meeting in March next year, and will only be further intensified after the details of the US tariff increases are released. 

Hopefully, both Saizeriya and Michelin-starred restaurants will still have a place in China’s dining scene by then.

This article was first published in Lianhe Zaobao as “米其林在中国不灵了？”.

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