HK dried seafood trade hit by China's graft fight

HONG KONG - In a narrow Hong Kong street filled with the tang of dried sea creatures, shopkeepers are blaming China's recent corruption crackdown for falling sales of expensive banquet foods such as shark fin and abalone.

Such items have fallen off the menu since China's new leadership came to power demanding austerity from Communist Party and military officials as a means of reining in graft and dampening public anger over corruption.

Suppliers, restaurants and hotels in the trading hub of Hong Kong all say the loss of appetite from the mainland has thinned out sales in a market looking for a portion of China's estimated annual 300 billion yuan (S$62.7 billion) expenditure on state-funded banquets.

On Hong Kong's Dried Seafood Street, the centre of trade in dried delicacies, shopkeeper Leung Wing-chiu told AFP that sales were down 20 per cent at a time when increased ethical awareness over shark fin and rising rents are pressuring business. "Beijing's frugality campaign has driven money out of my pocket," said the 94-year-old, who is also the Dried Sea Food & Grocery Merchants Association president. "Demand from mainland buyers, especially hotels and restaurants, has shrunk a lot. This is particularly true for high-end goods such as dried abalone, shark fins and bird's nest."

Two catering companies listed on the southern Chinese city's stock exchange even cited the government's emphasis on frugality as they issued profit warnings to shareholders last month.

Mr Leung said China's state-funded banquet culture was a key source of revenue, and while the economic slowdown had affected business over the past few years, "the situation has got a lot worse since the new leadership ascended to power".

Chinese officials have long held lavish liquor-drenched receptions as a way of building business relationships, greasing the wheels of power, and showing off wealth and status.

The Jiu San Society, one of China's eight legally recognised non-communist political parties, last year called for a curb on government spending on such banquets, which it estimated at 300 billion yuan a year. Other scholars put the figure even higher.

And in June, President Xi Jinping launched a "thorough clean-up" of the ruling Communist Party, vowing to target extravagance and waste. The Central Military Commission had already banned lavish banquets for high-ranking officers at the end of last year, while party officials were handed similar new rules.

Former high-flying Chinese politician Bo Xilai is on trial for corruption and revelations about private jet flights and rare animal meats have held Chinese readers spellbound.

Zhu Jiangnan, China Studies coordinator at the University of Hong Kong, said banquets were in a "grey area" of corruption. "Actually, in China, the word 'corruption' (fubai) is linked not only with . . . graft, bribery and embezzlement, but also unhealthy tendencies . . . such as extravagance and waste."

Wong Hiu-wan, a shopkeeper selling bird's nests, which have been used in Chinese cooking for centuries, blamed the directives from Beijing for a slowdown in business."Now, we have to count more on local consumers, because orders from mainland hotels and restaurants have gone down dramatically."

Two Hong Kong-listed catering giants, Tang Palace (China) Holdings and Xiao Nan Guo Restaurants Holdings Ltd, both issued profit warnings in July linked to the crackdown.

Tang Palace largely blamed "the issuance of a set of regulations and restrictions to promote frugality and curb waste by the Chinese government, casting an impact on certain customer groups' expenditure". Xiao Nan Guo said its first-half profit was hit by "the prolonged austerity campaign launched by the Chinese government to curb lavish spending and entertainment".

Others say traditional foods were already losing their attraction.

"The Chinese are turning their eyes towards Western and environmentally friendly food rather than traditional banquet favourites such as abalone and shark fin," said Ren Guoqiang of consultancy Roland Berger & Partner.

On top of environmental campaigning against products such as shark fin and Hong Kong's eye-watering rents, the graft crackdown is adding to the pressure on businesses along Dried Seafood Street.