(Bloomberg) -- Zhao Xiaowei did what would have been unthinkable just a few years ago: He quit his Beijing barista job and returned to his northeastern rust-belt hometown for a better future.

Tired of struggling to eke out a living in the nation’s overpriced capital, the 25-year-old is now earning more money running his own boutique cafe that serves up drip coffee made with high-grade Geisha beans for 60 yuan ($8.30) a cup. 

“I’m close to my family and there’s a hot meal for me when I get home,” Zhao said after making the move back to Dandong last June. “And most importantly, I have my own business.”

He is part of a growing reverse migration of workers to remote regions amid an economic downturn in China’s megacities, which has led to layoffs and fierce competition for remaining positions. This resettling is transforming so-called “lower-tier cities” as Western fast food outlets, bubble tea chains and electric vehicle dealers sprout up along main streets to cater to the returnees and locals with more income at their disposal. 

While college graduates and professionals are still aiming for high-paying jobs in big cities, data captured by Shanghai-based consultancy MetroDataTech reveal a net outflow of people in China’s financial hub Shanghai and tech boomtown Shenzhen in 2023.

Monthly spending by consumers in smaller cities accelerated in almost every category in the second half of 2023 while the situation was the opposite in big cities, according to a January survey of low-tier cities by UBS Evidence Lab. The frequency of consumption at tea and coffee shops accelerated significantly in lower-tier cities compared to a prior survey from UBS. 

“Living costs for young people in lower-tier cities are not that high, so they have the budget to enjoy food and drinks,” Joey Wat, chief executive officer of Yum China Holdings Inc., which operates KFC and Pizza Hut, told Bloomberg TV in February. “Young people in top tier cities need to pinch pennies as living costs are higher.” 

Yum China plans to add more than 5,000 outlets by 2026, with more than 50% of them outside megacities. Some 80% of the 180 restaurants Domino’s Pizza China operator DPC Dash Ltd. opened in the mainland last year were not in Beijing and Shanghai. 

It’s not just international brands that are chasing rural spenders. Roughly half the total stores operated by some of China’s biggest fast-food names — including burger chain Fuzhou Tastien Catering Operation Co. and bubble tea purveyor Mixue Bingcheng Co. — are in cities ranked tier 3 and lower, according to Canyandata, a Beijing-based food and beverage outlet data platform. Tastien and Luckin Coffee Inc. doubled their stores across China last year.

Indeed, those making the trek back to where they came from are finding chic shopping malls, new electric vehicles filling streets and stores abuzz with shoppers.

Home prices are just a fraction of those in metropolises and parents chip in for down payments or more. With more disposable income, consumers think nothing of spending on KFC dinners or pricey Lululemon Athletica Inc. sweatshirts. Some are buying Tesla Inc. cars, as China turns to rural areas to boost flagging EV sales growth.  

Small town consumers have more stable civil service, hospital and state-owned company careers, unlike big-city counterparts strained by pay and job cuts at companies from Internet firms to financial institutions. Top cities’ “996” work culture of 9 a.m. to 9 p.m. six days a week is all but nonexistent in many smaller areas.  

Guan Yinglu fled her previous work-around-the-clock Shanghai shipping company job for her hometown, the central Chinese city of Luzhou, where she opened a bakery last spring.

What she lost in earning power — she makes about a third of what she previously pulled in — Guan gained in richer life experiences and spending power because the yuan goes further in smaller cities. She is now married, has a dog and ends her days with time to enjoy dinner prepared by her parents or in-laws.

“I felt like I wasn’t living for myself or for people whom I love and I hated that,” Guan, 29, said.

Shifting more government resources to areas beyond big cities is narrowing the urban-rural gap and creating economic vibrancy in small counties, said Ernan Cui, a consumer analyst at Gavekal Dragonomics. Still, while eastern and southern regions of China are benefiting from this shift, other small cities are not, she added.

Furthermore, some returnees have made moves only out of economic necessity and are apt to head back to large cities when opportunities afford it, Cui said. 

Chen’s return to Nanchang in China’s southeast province of Jiangxi from global metropolis Hong Kong lasted just six months. The 30-year-old, who asked to use only her last name for privacy reasons, had invested in a local restaurant after being laid off late last year. When a private equity firm offered her a job in early 2024, she sold her restaurant stake and returned to Hong Kong to work as an investment director.

“Life’s not really easy back in Nanchang,” Chen said. “I started at 10 o’clock in the morning and closed the store at 10 in the evening.” 

Ymir Li, though, is tapping the new opportunity in small cities. He opened a franchise of popular bubble tea chain Heytea in a southwestern city of 2.5 million in 2022 after returning from megacity Chengdu. He now operates two outlets, employing three people who returned after working in top cities like Shenzhen and Shanghai. 

“They have seen the world and decided life is much easier at home,” Li said.

--With assistance from Yujing Liu.

©2024 Bloomberg L.P.