A renowned restaurant company is dropping expensive dishes and focusing on affordable meals after being hit hard by the government's frugality campaign.

Beijing Xiang'eqing Co's Chairman Meng Kai said: "High-priced dishes will disappear from Xiang'eqing after predicted big losses in the first quarter following the government's drive against banquets at the public's expense."

The company is forecast to suffer losses of up to 70 million yuan (US$11.18 million) in first quarter. In the same period last year, the company made a profit of 46.23 million yuan.

Meng said the Shenzhen-listed restaurant chain had decided to meet the needs of the majority of the public by providing them with affordable food in an atmosphere suitable for family and friends.

In the first two months of this year, China's catering sector reported 403 billion yuan in revenue, up 8.4 percent on the same period last year, National Bureau of Statistics data showed.

But sales at medium to large restaurants were down 3.3 percent.

To meet the government's call for an end to extravagance and due to the changing market, Xiang'eqing is promoting fair-priced dishes, Meng said.

The company will stop serving those priced at 200 yuan or above and promote meals costing 50 to 60 yuan.

Up to 60 percent of restaurants, mostly upmarket ones, said they had seen reservations canceled after the Party's call for officials to be frugal, according to a survey conducted by the China Cuisine Association.

The first half of this year will mark a key period of adjustment for restaurant businesses, the association said.

Xiang'eqing has begun its change by introducing fast food, group meals and processed food.

"Group meals will be the company's No. 1 business," said Meng. Xiang'eqing is striving to create a renowned brand in providing trustworthy group meals for schools, hospitals and companies, he said. The restaurant will also look to "liberate the mass from their kitchens" by providing processed and Chinese fast food for communities and convenience stores.

Dai Bin, president of the China Tourism Academy, said upmarket restaurants were born due to the unconventional demand of official banquets, which pushed prices out of the most people's reach.

Upmarket restaurants in Shanghai saw revenues fall by 20 percent in January compared to the same month in 2012, the Ministry of Commerce said previously.

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