01 April 2005

With gross domestic product (GDP) increasing, on average, more than 8% annually since 1978, China has become a major player in the global economy and, in particular, has experienced tremendous economic uplift since 1990.

This is due to a number of factors, including the country's entry into the World Trade Organisation in 2002 and the signing of a free trade agreement with the 10 members of the South East Asian Countries Association, the world's largest free-trade zone.

But what does that mean to foreign investors and, in particular, opportunities for the foodservice sector?

The Chinese government designated the catering industry "a new economic growth point" in 1998 and, in 2004, the Ministry of Commerce estimated the turnover of the Chinese catering industry, of which eating-out takes the lion's share, to be worth Yuan730b (45b).

The southern China city of Guangzhou has the highest amount of diners, who spend more per head than anywhere else in the country, closely followed by Shanghai, where Yuan14.62b (1b) was spent in the first half of 2004, with the capital, Beijing, coming in third place.

The Beijing Municipal Commercial Bureau estimates that residents of the capital city spent around Yuan29b (1.8B) on food in the final six months of 2004, of which nearly 30% was on eating out. The China Cuisine Association puts the increase down to a rise in salaries and peaceful living conditions.

According to market research company Datamonitor, the market forecast for China in 2008 for the hotels, restaurants and cafs sector is a value of 82b, with a compound annual growth rate of 13.6%. The leading source of revenue in this sector is the restaurants and cafs market, which accounts for 44.3% of value, with fast food coming in a close second at 40%. It is expected to sustain this market share through to 2008.

Datamonitor also believes that, despite the foodservice market being traditionally fragmented between small-scale chains and independent outlets, liberalisation by the Chinese government is opening up the market to foreign companies and consolidation will eventually take place.

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