Chinese restaurants starved for cash as virus hits industry

Chinese restaurants starved for cash as virus hits industry
Fears over coronavirus sweeping across the country have had a devastating effect on dine-in business for eateries such as this restaurant in Beijing. (AFP)
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Updated 23 February 2020

Chinese restaurants starved for cash as virus hits industry

Chinese restaurants starved for cash as virus hits industry
  • The longer the disruptions drag on, the harder it will be to avert significant damage to employment

BEIJING: It is lunch time in Beijing, but the only diner in Cindy’s Cafe is an employee having a staff meal — it has been closed for more than three weeks as China battles a deadly virus epidemic.

Restaurants are taking a huge hit as many people across the country of 1.4 billion have been either under some form of quarantine or are reluctant to venture outside since late January over fears of contagion.

At Cindy’s Cafe, in  Beijing’s Roosevelt Plaza, dine-in revenue has fallen to zero, and relying on deliveries hardly makes up the shortfall, said manager Cai Yaoyang.

“On a good day in the past, we could earn more than 1,000 yuan ($143) a day from deliveries,” Cai told AFP. “Now, it’s just around 200 to 300 yuan a day. The impact is especially big.”

He estimates losses to the company, which has more than 10 outlets in China, could be “at least a few million (yuan)” given rent and unused stock from the unexpected Lunar New Year closures. “If there is no business, staff may be asked to take more days off.” 

Many restaurants have suspended dine-ins to curb the spread of the virus, but eateries that have resumed operations remain largely empty, with people still encouraged to stay home to avoid infections.

The new coronavirus has killed more than 2,400 in China and infected nearly 77,000.

At an outlet of Bellagio Cafe, another restaurant chain, employee Zhu Xiangying told AFP it had only made 30,000 yuan in around 10 days, compared with over 200,000 yuan in normal times.

The China Cuisine Association said in a report this month that the country’s restaurant industry saw 4.67 trillion yuan ($665 billion) in catering revenue last year, with earnings over the Lunar New Year break making up over 15 percent.

With millions of people staying indoors during the festival this year, those holiday earnings have evaporated.

The hotpot chain Haidilao — which has temporarily closed its mainland China outlets — has turned to selling fresh and frozen products directly to communities.

In Yunhaiyao, a chain specializing in Yunnan cuisine, restaurant tables are piled with fresh vegetables instead of cooked dishes — ready to be packed and delivered to housing compounds.

Yunhaiyao, which has more than 100 outlets in China, now bulk-buys groceries for residents near its stores as a new income stream.

It has also rolled out a line of prepared ingredients so customers can quickly whip up Yunnan specialities while cooped up at home.

Zhao Yebule, store manager at Yunhaiyao’s Tongzhou branch in Beijing, said deliveries can rake in up to 6,000 yuan daily.

But the company is still in a pinch.

Li Jianying, a regional manager overseeing 10 outlets, said only around half of his staff were ready to resume work.

Others cannot leave their residential compounds freely or face a 14-day quarantine when they return to Beijing.

“Our sales are just about 10 percent that of regular times before the epidemic,” with delivery sales falling by half, he added.

Yunhaiyao remains worried about expenses such as rent, and has taken a 10 million yuan loan to ease cashflow pressures.

Li, however, stressed there were no plans to cut staff for now.

One way out is to “share” employees with other businesses that are enjoying an increase in demand: e-commerce platforms.

JD.com saw a 215 percent spike in fresh food sales over the Lunar New Year, while Meituan Grocery’s daily sales in Beijing tripled at its peak during the holiday.

Li estimates “a few hundred” Yunhaiyao staff have taken on short-term work with third-party firms such as supermarkets or online platforms.

Cai added Cindy Cafe was in talks to help workers find temporary employment.

JD.com and JD-backed Dada Group have offered more than 35,000 jobs, with over half being frontline roles such as couriers and drivers, while around 40 workers from restaurant chain Putien now staff Meituan Grocery as well.

Yet, the current situation remains a looming threat to jobs.

A survey by Peking and Tsinghua universities of about 1,000 small- and medium-sized enterprises, said about 85 percent of these firms could only survive up to three months on their cash reserves.

Even as policymakers extend preferential loans and introduce tax breaks authorities “won’t be able to extend life support to all,” said Capital Economics in a report on Wednesday. “The longer the disruptions drag on, the harder it will be to avert significant damage to employment.” 

As it is, the big players are hurting. Lao Xiang Ji, which has some 800 outlets, estimates it suffered at least 500 million yuan in losses, said chairman Shu Cong Xuan in a video on the company’s WeChat account.


Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban
Updated 48 sec ago

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban
  • The Houthi ban has forced travelers to Sanaa and other areas controlled by the militant group into buying old banknotes from the black market at a higher rate

ALEXANDRIA: The Central Bank of Yemen in Aden has injected billions of riyals in old large-sized 1,000 banknotes into the market to address a chronic shortage of cash.

The bank also implemented several other economic measures to control the chaotic exchange market and put an end to the fall in the Yemeni riyal.

Since late 2019, the Iran-backed Houthis have banned the use of banknotes printed by the Yemeni government in Aden, creating a severe cash crunch in areas under their control which has led to local exchange firms and banks stopping paying salaries and raising remittance charges.

The Houthi ban has forced travelers to Sanaa and other areas controlled by the militant group into buying old banknotes from the black market at a higher rate and carrying Saudi riyals or US dollars.

In a challenge to the Houthis, the central bank has put billions of riyals in old banknotes into the market and started withdrawing the newly printed 1,000 banknote. Yemenis can get old banknotes from local banks and exchange firms.

However, the Houthis warned people against using the large banknotes and published copies and serial numbers of the newly circulated cash.

In a bid to regulate the exchange market and curb the plunging value of the riyal, the central bank has tightened regulations for opening new exchange shops or firms, demanding that applicants produce a three-year feasibility study prepared by a certified accountant showing estimated budgets.

Existing exchange companies must now send their annual financial statements to the bank, use an approved software for their financial activities, apply international financial reporting standards, and audit their accounts by accountants certified by the central bank.

Some Yemeni economists, however, have cast doubt over the central bank’s ability to enact the regulations after the Yemeni riyal on Wednesday broke another historic record low against the dollar.

Local money traders told Arab News on Wednesday that the Yemeni riyal was trading at 1020 to the dollar in government-controlled areas, compared to less than 980 a month ago. When the war broke out in late 2014, the Yemeni riyal was sold at 215 to the dollar.

The Yemeni government previously relocated the central bank’s headquarters from Sanaa to Aden, floated the Yemeni riyal to bridge the gap between the official rate and the black market, closed many exchange shops, and printed billions of riyals to pay public servants. But all the measures proved ineffective on the ground as the Yemeni riyal continued to drop.

Waled Al-Attas, an assistant professor of financial and banking sciences at Hadhramout University, told Arab News: “The central bank is required to control the market and close unlicensed exchange shops in parallel with tightening control and procedures on existing exchange entities.”

He noted that the latest injection of cash into the market had boosted foreign currency speculation activities and pushed up inflation.

“The large 1,000 banknote that the central bank pumped into the market represents an additional burden and additional liquidity that will cause more inflation, higher prices, and speculation on exchange rates,” he added.

The continuing devaluation of the Yemeni riyal has pushed up food and fuel prices in government-controlled areas and triggered protests.


Cryptocurrencies look up despite regulatory issues

Cryptocurrencies look up despite regulatory issues
Updated 16 min 27 sec ago

Cryptocurrencies look up despite regulatory issues

Cryptocurrencies look up despite regulatory issues

RIYADH, DUBAI: While regulatory issues continue to chase cryptocurrencies, their stock saw a rise on Wednesday with Bitcoin trading higher by 1.28 percent to $39,037.94 at 5 p.m. Riyadh time.

Ether, the second most traded cryptocurrency, traded at $2,609.22, up 3.56 percent, according to data from Coindesk.

The pressure on the digital currency continues, as HSBC became the latest lender to have suspended payments to cyrptocurrency exchange platform Binance in the UK.

“We have made this decision due to concerns about the possible risks to you,” the bank said in a statement, where it cited a consumer warning by the country’s financial regulator.

Regulators in Malaysia, Japan, Hong Kong, Thailand, and Germany have previously issued warnings against Binance.

HSBC earlier said it was not planning to launch a crypto trading desk or offer digital coins as an investment, describing these assets as “volatile” and lacking of transparency.

But Wells Fargo, one of the largest wealth managers in the US, has a different stance on cryptocurrency, as it recently launched crypto investment offerings to its clients.

This was confirmed to Business Insider by the company’s spokesperson, Bitcoin.com has reported.

Also in the US, NCR Corp., a global leader in ATM software applications, said it was acquiring Libertyx, an American crypto company that claims to be the US “first and largest network of bitcoin ATMs, cashiers, and kiosks.”

In Argentina, two blockchain-based digital identity projects are being developed, according to a report by Bitcoin.com.

One of the projects is aimed at improving government-citizen relationships in Misiones, and the other seeks to promote financial inclusion in the Gran Chaco region. They are being organized by Project Didi, which financed by the Inter-American Development Bank.


Saudi property market adapts to new tax

Saudi property market adapts to new tax
Updated 22 min 16 sec ago

Saudi property market adapts to new tax

Saudi property market adapts to new tax

RIYADH: The Saudi Zakat, Tax and Customs Authority registered over 543,000 transactions related to the Real Estate Transaction Tax (RETT) since its implementation in October 2020, the official Saudi Press Agency (SPA) reported.

The highest number of tax transactions was reported in Riyadh with 125,110 followed by Jeddah (55,680), Buraidah (50,462), Makkah (18,955) and Madinah (18,557).

“This gives a positive impression to the property market,” Khaled Almobid, CEO of Riyadh-based Menassat Reality Co. told Arab News.

He said many thought the new tax might contribute to a decline in the demand of property but “the market started to adapt to it,” which is a positive sign for the Kingdom’s real estate sector.

Property deals in Saudi Arabia are exempted from a 15 percent value-added tax (VAT) as the government seeks to support the real estate sector.

Instead a 5 percent tax was introduced last year to boost the economy as it was hit hard by the impact of the coronavirus disease (COVID-19) pandemic and weaker oil prices.

“The buyer used to pay a value-added tax (VAT) of 15 percent, and due to the real estate conditions in the Kingdom, it was turned into a tax paid by the seller, not the buyer, called the real estate transaction tax, and it was reduced to 5 percent,” Almobid said.


Tabby raises $500 million, eyes new GCC markets

Tabby raises $500 million, eyes new GCC markets
Updated 23 min 25 sec ago

Tabby raises $500 million, eyes new GCC markets

Tabby raises $500 million, eyes new GCC markets

RIYADH: Tabby, the leading buy now, pay later (BNPL) provider in Saudi Arabia and the UAE has raised $50 million in a new equity round valuing the company at $300 million.

Global Founders Capital and STV led the funding round, with participation from Delivery Hero and CCVA. Existing investors, including Arbor Ventures, Mubadala Investment Capital, Raed Ventures, Global Ventures, MSA Capital, VentureSouq, Outliers VC, JIMCO, and HOF, also participated.

This comes one month after the firm raised $50 million in debt financing bringing its total funding to over $130 million in less than two years.

The fintech firm’s Series B financing will be used to expand its product portfolio and enter new markets.

The funding will help tabby further service the growing demand for its BNPL products as customer usage continues to soar, especially in Saudi Arabia, the firm’s largest market.

Ahmad Al-Shammari, a partner at STV, said: “As the global BNPL market is expected to grow at 30 percent CAGR over the next five years, we estimate that MENA will grow at least twice as fast, further accelerated by a rapid switch to contactless payments, e-commerce growth, and access to credit.”

Financial technology startups in Saudi Arabia and the UAE offering online short-term credit say they are enjoying exponential growth as the coronavirus pandemic drives a shift in consumer spending online.

BNPL purchasing is relatively new to the region where consumers have traditionally been skeptical of paying for goods before getting them.

But Saudi-based Tamara and UAE’s Spotii, Tabby, and Postpay all say the take-up has far exceeded initial expectations. And investors are paying attention. Tamara recently raised $110 million in debt and equity, a large amount for an early-stage Middle East startup.

“With global players consolidating the MENA BNPL space, we are proud to continue building a local business and work with investors who understand its value. This investment will enable us to deliver the most rewarding and relevant shopping experience for regional consumers and retailers,” said Hosam Arab, CEO, and co-founder of the fintech firm.

This investment marks Delivery Hero’s first fintech investment in MENA. Delivery Hero, which owns and operates several regional food and grocery delivery companies including Talabat, InstaShop, and Hunger Station, has one of the largest customer bases in the Middle East and Africa (MENA) region.

“We are excited to be investing in tabby as our first FinTech investment in MENA, a strategically important region for Delivery Hero. We see great potential in tabby to drive the industry forward and are proud to be supporting the company on its growth journey,” Mark Venema, senior vice president, strategy at Delivery Hero, said.


Inflation in Saudi Arabia likely to decline in coming months

Inflation in Saudi Arabia likely to decline in coming months
Updated 52 min 7 sec ago

Inflation in Saudi Arabia likely to decline in coming months

Inflation in Saudi Arabia likely to decline in coming months
  • Credit to private companies will increase, depending on the Saudi economy recovery, says Al-Sudairi

RIYADH: The inflation rate in Saudi Arabia is expected to be 3.2 percent and the rate would decline because of a higher base, Mazen Al-Sudairi, head of research at Al-Rajhi Capital, told Arab News.

The cost of living index of Saudi Arabia remained in the positive trajectory and increased by 6.2 percent year-on-year in June 2021, mainly driven by a rise in value-added tax (VAT) from 5 percent to 15 percent in July 2020, according to Al-Rajhi Capital.

Saudi spending in the local market, especially in the retail, food, and beverages, and health segments continues to support the economy, it added.

Point of sales transactions continued their uptrend, increasing 4.6 percent in June 2021 compared to June of last year, primarily driven by an increase in restaurants and hotels, clothing and footwear, and health segments, Saudi Central Bank (SAMA) data revealed.

Credit to the private sector increased 16.8 percent year-on-year in June, while bank claims on the public sector increased 9.6 percent and the deposits grew by 10.2 percent, the official data showed.

Credit to private companies will increase, depending on the Saudi economy recovery, said Al-Sudairi.

SAMA also pointed out in its latest monthly report that remittances from Saudi nationals increased by 56 percent year-on-year in June 2021, while remittances growth from non-Saudi nationals declined 3.4 percent.

Remittance for Saudis increased due to an increase in travel while for expats the trend remains broadly flat, Al-Sudairi added.

The International Monetary Fund (IMF) said that Saudi Arabia’s economy is recovering well from the pandemic, and the Kingdom opened its doors to vaccinated foreign tourists on Aug.1.