Wave of Chinese Restaurants Close in Hong Kong

People shop in Hong Kong in this undated photo. (Adrian Yu/The Epoch Times)

Money has been flowing from mainland China into Hong Kong, setting a record high of over 1 trillion yuan ($137.5 billion) deposits in recent months. As part of the trend, over 130 mainland Chinese restaurants have opened in the city, too. However, many of those businesses have closed soon after opening their doors, prompting questions over what it all means.

Capital Flight Puts Pressure on Yuan

On June 26, the offshore yuan to U.S. dollar exchange rate fell below 7.3, marking the lowest since November 2023.

According to the China Foreign Exchange Trade System, the yuan midpoint rate against the U.S. dollar was reported at 7.12, hitting a new low in the past seven months. So far this year, the yuan has depreciated by over 2 percent against the U.S. dollar.

China observer and political commentator Ji Da believes that mainland Chinese investors are taking their money out of China due to geopolitical factors and the Chinese Communist Party (CCP)’s tightening grip on capital controls.

“They are abandoning the domestic market and transferring funds to higher-yielding assets and regions, indicating yuan depreciation and substantial capital outflow from the mainland to Hong Kong,” she recently told the Hong Kong edition of The Epoch Times.

Based on data from the Hong Kong Monetary Authority, yuan deposits have shown an upward trend in the past two months after slight fluctuations.

In April, yuan deposits in Hong Kong increased by 15.2 percent month-on-month, reaching 1.09 trillion yuan (about $149.9 billion) at the end of April. The total amount of yuan remittances for cross-border trade settlement in April was 1.25 trillion yuan (about $171.9 billion), compared to 1.24 trillion yuan (about $170.6 billion) in March.

In May, Yuan deposits increased by 4.2 percent month-on-month, reaching 1.13 trillion yuan (about $155.4 billion) at the end of May, setting a new record high. The total amount of yuan remittances for cross-border trade settlement that month was 1.18 trillion yuan (about $162.3 billion).

The Hong Kong Monetary Authority said caution should be taken when interpreting monthly monetary statistics because they are affected by multiple factors, including “seasonal and IPO-related funding demand as well as business and investment-related activities.”

Nevertheless, according to the authorities, Chinese investors have injected 129 billion yuan ($17.7 billion) into Hong Kong through southbound transactions this year.

Over 130 Chinese Eateries Flood Into Hong Kong

With a large influx of yuan into Hong Kong, observers have noted a surge of mainland Chinese eateries in the city since last year.

According to Hong Kong’s Food and Environmental Hygiene Department, at least 42 mainland Chinese eateries and tea shops have opened with over 100 branches since early 2023. These include well-known chain brands and popular shops, which translate as Muwu BBQ, CoCo Four, and Xiao Noodles.

Invest Hong Kong, the Hong Kong authorities’ department responsible for foreign direct investment, assisted 136 mainland Chinese companies in opening or expanding their businesses in the city last year. One such company was Tai Er Group, which opened four pickled fish stores.

Most mainland businesses are concentrated in crowded areas. Tea shops and Sichuan cuisine are the mainstays–among them are 30 lemon tea shops, 15 other specialty drink shops, and 17 Sichuan restaurants. Popular mainland dishes include Northeast barbecue and river snail rice noodles.

A view of Central Hong Kong on Dec. 24, 2023. (Bill Cox/The Epoch Times)

Chinese Restaurants Close Shop

At the same time, some Chinese outlets are closing. The Hong Kong edition of The Epoch Times confirmed the closure of multiple mainland restaurants across the city.

Fast food chain Carrot to the South closed shop in Mong Kok last month, only four months after opening its doors. Specializing in Hunan cuisine, the company also has a restaurant in China’s Shenzhen city.

GuluGulu, another popular chain that has been around for 27 years, recently closed down its business in Yau Ma Tei. The landlord started to look for a new tenant at the end of April. The Guanzhou-based specialty tea shop has over 500 chains across 15 provinces and 50 cities in China.  

LMM Lemon Tea opened in June 2023 in Mong Kok and has already closed. Its lease was set to expire in April 2025, and the landlord has been looking for new tenants since January.

Finance expert Yan Baogang says there could be many reasons to explain why new mainland business would go out of business so quickly in Hong Kong.

“The rents and wages are higher than in the mainland, and the Hongkongers may not like [the mainland cuisine], making it difficult to operate and make profit.”

Mr. Yan also said that in general, setting up businesses in Hong Kong can be a way for mainland Chinese to transfer money out of China amid the CCP’s increased scrutiny of capital outflows.

“The funds already withdrawn overseas are unlikely to be transferred back to the domestic market,” he said.

“It may be a disguised way of capital outflow.”