Sales of traditional palm-size pastries eaten during Mid-Autumn Festival feel the pitch of campaign to curb extravagance launched by nation’s leader, reports Xu Junqian in Shanghai.

There is an old folk adage that well describes what China’s mooncake market, and perhaps entire gift market is like: Those who eat (mooncakes) never spend a bit and those who buy never get a bite.

The sweet, palm-sized, square or round pastries that Chinese people have traditionally eaten at family gatherings during Mid-Autumn Festival for ages became a focal point, if not the epitome of China’s gifting-giving culture and a penchant for luxury and extravagance.

Corporations give mooncakes — or vouchers for them — to business partners and government officials, subordinates to bosses and parents to their children’s teachers to cultivate guanxi, or relations, whose importance might be illustrated by the Western saying: It’s not what you know, but who you know that matters.

But the situation has changed radically this year, and the once-popular mooncakes have become almost taboo — following Moutai (Chinese liquor) and luxury banquets — widely shunned even weeks before Mid-Autumn Festival, which falls on Sept 19 this year.

Two events led to the change. First, President Xi Jinping implemented “eight rules” at the end of last year to fight corruption and reduce extravagance. Then, in late August, the disciplinary authority of the Communist Party of China issued a notice banning the use of government money to buy mooncakes as gifts during Mid-Autumn Festival and National Day Holiday, from Oct 1 to 7.

The disciplinary watchdog repeated the message in early September, instructing officials nationwide to avoid any lavish banquets and gifts, including mooncakes, paid for with public funds during the upcoming holiday.

Mooncake sales drop

In a back alley in Shanghai near the headquarters of Xinghualou, the traditional bakery chain, mooncake voucher scalpers have gathered for years to “do business” as the festival approached. But the atmosphere is grim this year.

“It’s unprecedented,” a full-time scalper who gave only his surname, Shi, said recently.

Shi complained he hadn’t “recycled a single mooncake voucher over the past weekend”, while in previous years, the 40-something Shanghai native would collect scores of vouchers in a single weekday morning.

“The main problem is that nobody is coming to sell their vouchers because nobody is allowed to give them as gifts,” he said.

Shi said this is “my most important season” and the amount of business he lost was incalculable.

According to the Shanghai Confectionary Industry Association, at least 40 percent of mooncakes sold every year were group-purchased by companies and institutions as gifts for their “clients on the special occasion”.

How much of that 40 percent will vanish this year is not yet known, but the association said mooncake sales in Shanghai were down at least 20 percent this year in five-star hotels, restaurants and bakeries.

“It’s just a few weeks before the festival. Usually this is the peak sales time,” said Feng Fusheng, deputy secretary-general of the association. “If there’s no peak now, it’s not going to happen at all, because mooncakes are a seasonal thing.”

Nationwide, mooncake sales have also declined by 20 percent compared with last year, the China Association of Bakery and Confectionery Industry said. It estimated that 280,000 metric tons of mooncakes were produced this year, and sales revenue is likely to exceed 16 billion yuan ($2.6 billion).

Pastries, crab, Moutai

It is not the first time the central government tried to regulate the mooncake market. In 2006, at a time when the pastry’s packaging was getting ever-more sumptuous, the government stipulated that the cost of the packaging could not account for more than 25 percent of the factory expense of the item.

Manufacturers sought new ways to enhance the luxury value and began stuffing mooncakes with expensive fillings like truffle and abalone.

While traditional mooncakes are filled with red-bean paste and lotus seeds and cost 5 to 6 yuan, the tendency to turn them into luxury items has persisted.

It was even joked about. During last Mid-Autumn Festival, Chinese film director Feng Xiaogang wrote on his micro blog that if anyone wanted to give him an expensive gift, he would prefer cash to mooncakes.

But this year is different. Not only has the overall volume of mooncake sales declined, so has the price, in spite of the general inflation. Feng from the Shanghai association said that 78.6 percent of the mooncakes sold in Shanghai cost less than 200 yuan for packages with six to eight pastries.

And only 14 out of the 406 kinds of packed mooncakes cost more than 400 yuan, the so-called luxury mooncakes.

The main victims of the mooncake crackdown are the five-star hotels and high-end restaurants, and their suppliers of luxury mooncakes.

The marketing manager at the Ritz Carlton, Shanghai Pudong told China Business News that mooncake orders from pharmaceutical companies are almost zero, likely a result of a recent anti-corruption investigation initiated by the government. Other five-star hotels confirmed that orders from State-owned companies and the government have dropped by at least 50 percent this year, even though the hotels are offering up to 40 percent discounts.

A manager named Su at a food-processing factory in Nanjing, Jiangsu province, said that his hotel clients have cut about 30 percent of mooncake orders this year, mainly because of the policy. Most Chinese five-star hotels outsource their mooncake baking.

Other popular alternatives among festival gifts are also having a tough time.

Yang Weilong, director of the Crab Association of Yangcheng Lake in Jiangsu province, said the crab season has just started but sales are likely to take a heavy hit from the anti-corruption policy.

Yang predicted that local dealers sales will fall by 30 percent year-on-year, and he said that sellers would be unlikely to recoup the 10 percent inflation in costs of producing the “divine lake food” this year because of the bleak market.

Sales of Moutai, the Chinese liquor, have plunged since the beginning of this year, also because of the campaign against lavish spending. Kweichow Moutai Co Ltd, China’s top liquor producer, reported “close-to-flat” revenue growth in the first half of the year, the lowest since it was listed in 2001.

Budget pastry revival

But that doesn’t mean people have stopped eating mooncakes this year. On the contrary, inexpensive types, the most traditional kinds, are seeing a revival in the market.

In Shanghai’s bustling Huaihai Road, several food stores and restaurants that sell meat-stuffed mooncakes for 3 yuan apiece have long lines of customers all day. Crunchy cakes with juicy fillings similar to the local specialty, xiaolongbao, are selling like hotcakes to office workers in the area who spend up to two hours in line to buy them.

Cai Hongjie, general manager of Wangjiasha, a traditional eatery in Shanghai, said they have been selling more than 8,000 of meat-filled mooncakes a day in recent weeks, and the peak is yet to come.

Ice cream mooncakes from foreign companies such as Haagen-Dazs are becoming popular among young people.

Shi, the scalper, said that seven of every 10 vouchers he has resold this year are from Haagen-Dazs or other ice-cream mooncake producers, “because that’s something people are actually willing to pay for”.

Xu Zhen, a salesman at the website vip.fescoadecco, which helps companies pick gifts for their staff, said mooncake vouchers from ice cream sellers such as Cold Stone and Dairy Queen are the most popular among human resources people.

“Mooncakes, essentially, are food,” said Gu Xiaoming, a sociologist from Shanghai Fudan University. “In ancient times, they were filled with meaning as a symbol of the harvest moon and family gatherings. Now, as they gradually lose their function as gifts, they may again start to be appreciated for their gastronomic beauty.”