Why the shutters are coming down on many of Spain’s Chinese bazaars

The brutal blow to consumption triggered by the coronavirus pandemic has had a huge impact on Asian traders running Chinese bazaars in the biggest Spanish cities. Many of these large stores are now either empty or in the process of shutting up shop as their owners return to China in significant numbers.

“Health comes first,” is a common observation among these shopkeepers. Many have been against the relaxation of mask-wearing rules outdoors during the fifth wave of the pandemic in Spain and are moving to their country to get vaccinated and start over back home. Others, however, are taking advantage of the current economic recovery to shift location to the suburbs while a third even more enterprising group is choosing to reinvent itself.

There are compatriots who believe the end of the pandemic is still a long way off and they do not feel safe here

Attorney Lidan Qi, CEO of the consultancy firm Puente China España

A stroll around Madrid reveals that the streets are peppered with traditional Chinese bazaars either for sale or for rent. Pedro Nueno, professor at the IESE business school in Madrid and founder and honorary president of the China Europe International Business School (CEIBS), points to Covid-19 as the cause: “The lack of tourism, the drastic change in consumer habits that has had a huge impact on offline shopping, the quality of products in some cases, and the increase in regulations and inspections for all businesses.”

Attorney Lidan Qi, CEO of the consultancy firm Puente China España, which advises large Chinese companies and entrepreneurs, also flags up the pandemic and its fallout as the principal cause. “There are compatriots who believe the end of the pandemic is still a long way off and they do not feel safe here,” she says. “Asians are very cautious. Many of the closures are by traders who left at the start of the pandemic and can’t return because they no longer have the savings to start over.” Figures from Spain’s National Statistics Institute (INE) indicate that the population of 232,807 Chinese in 2020 dropped to 228,564 on January 1, 2021 (including 170 deaths).

The vertiginous cost of renting premises is also a factor; many could not survive the lockdown when they made no sales at all but still had to pay high rents. In one of the two bazaars on Juan Montalvo street, in the Ciudad Universitaria area of Madrid, the tenant left the 300 square meter store because he was paying €4,000 a month in rent and was unable to reach an agreement with the owner to lower the cost. Eduardo Molet, owner of a real estate company of the same name, says that “although some landlords have started to lower the rents, the narrow profit margins specific to these stores means they can’t survive.”

Natural entrepreneurs

According to Molet, Asian businesses have held out longer than most, but “those that had given themselves until the summer are starting to fail.” Any incipient reduction in rents is, however, being taken advantage of by Asian traders choosing to reinvent themselves with other types of more economical businesses such as bakeries, according to Lidan Qi. “The Chinese are very enterprising and those who remain in Spain will look at what to do now,” she says. “We are talking about professionals who know how to detect opportunities and move fast,” adds Pedro Nueno.

A spokesman for the Association of Chinese in Spain, who goes by the name of Li, adds: “Those who see the crisis as an opportunity have closed their premises and are already working to open businesses and franchises related to energy, bread, home delivery and online sales.” He predicts that those will be the Chinese businesses of the future in Spain, adding that another reason a number of his compatriots have gone bankrupt is the increase in the cost of international transport, which is “three times higher” than before. This, of course, has had a significant impact on bringing goods over from China.

The owner of the bazaar on Madrid’s Fernando el Católico street, in the Chamberí district, and who prefers to remain anonymous, blames the closures on the fact that the pandemic has meant “people go out less and buy only what they need.” But he also blames the huge competition from e-commerce. “Almost everything is bought online these days,” he says. Not far away, in Cea Bermúdez street, another bazaar is in the process of shutting down.

High Covid case rates

One deserted premises on Magallanes street has provided an opportunity for a young Asian couple who have managed to clinch a rent deal of €2,500 a month and aim “to undertake the challenge with great enthusiasm,” despite the big financial outlay ahead. They are taking the plunge, they say, because they are familiar with the business given that their mother already has a similar establishment.

In Barcelona, the landscape is somewhat different with small stores closing “due to bankruptcy or high Covid case rates.” This has led to a change of strategy among Chinese entrepreneurs, according to Jonhi Zhang, a textile wholesaler and general secretary of the Federation of Chinese Corporations in Spain. “They are moving from premises of more than 1,000 square meters in the city to large areas, upwards of 5,000 square meters on the outskirts,” he says. “They close a small restaurant and open large wok restaurants because in Barcelona it is a good time to snap up good premises.” He also highlights the development of bakery chains run by Chinese that employ local staff – business transformation is on the agenda.

English version by Heather Galloway.