CHINESE ECONOMY STALLS AT HOME
Monday, January 16th, 2012
Chinese malls look for more shoppers
By Simon Rabinovitch in Beijing
As crowds shouted and pushed for the latest iPhone in Beijing on Friday, a glitzy mall across the street was bathed in silence, with just a handful of shoppers hunting for bargains.
The frenzy at the Apple store underscored the rise of the Chinese consumer, a development that analysts say is needed to support the global economy and make China’s growth more sustainable.
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But the empty SOHO complex cast a different light on what is happening in the world’s second-largest economy: consumption is rising, but not nearly as fast as vast shopping centres are being built.
A boom in the number of malls without a matching increase in actual shopping gets to the heart of what analysts see as the fundamental problem of the Chinese economy: too much investment, too little consumption.
“There was an exponential two or three years where record numbers of malls were built around the country,” said Frank Marriott, senior director for Asia at property consultant Savills. “It has to take a bit of a breather.”
Within a half-hour walk from Beijing’s fashionable Sanlitun district, eight shopping complexes have opened in recent years. While one mall called the Village – home to the Apple store that was pelted with eggs on Friday – is bustling, many of the others are visibly struggling.
At the SOHO mall, shuttered stores in its six retail buildings drastically outnumber the open ones. One building was entirely padlocked, while the only activity in another was a five-day garage sale of discount clothes.
“We came here just because one of the restaurants was recommended. We wouldn’t actually shop here when there’s so many good stores (in the Village) across the street,” said He Tian, a university student, walking with his girlfriend.
When China announces its 2011 growth rate on Tuesday, the figure is expected to be about 9 per cent as the country continues its three-decade-long boom.
It might also reveal that China has finally reached a turning point, with consumption becoming the biggest driver of growth. The problem is that this change does not appear to be happening quickly enough.
Household consumption has fallen over the past decade to just over a third of GDP, according to official data which even if understated is exceptionally low for a major economy in peacetime. Meanwhile, investment has soared to 48.6 per cent of GDP, which economists say marks an unhealthy dependence on capital spending.
“Hopefully we have started to see the beginning of improvement, but the imbalance problem is still very serious in China,” said Huang Yiping, an economist with Barclays Capital.
With much of Chinese investment concentrated in property, fears have mounted about the waste and the potential for bad debts. Concerns have focused on the vacant apartments that can be found throughout China, but empty shopping malls are a very public symptom of the same disease.
A little south of SOHO, Beijing’s cavernous new Fortune Mall echoed with the sounds of gunfire – a bored retailer was playing a loud video game during what was supposed to be the peak shopping period a week before China’s new year festival.
On the second floor, a lady in a red parka paced outside one of the several stores whose windows had been papered over. “They sold jade here. I was their part-time accountant. But they seem to have left and didn’t even tell me,” she said.
Amid the competition, one of Sanlitun’s mainstays, the Pacific Department Store, which was seen as ancient after its 10 years, closed its doors late last year.
Tianyi, a low-end mall in downtown Beijing, gave further evidence of a saturated marketplace. It was full of shoppers, but not quite as packed as in the past, according to store workers.
“We used to need two people, but now I can look after it myself and I have little to do,” said Mr Zhang, standing at a counter stacked with bathroom accessories.
The glut of retail space in Beijing is part of a broader trend. Guo Zengli, president of the Mall China Information Centre, said last year that the number of shopping centres nationwide would increase 893 per cent between 2001 and 2015.
The developers are hoping that a new generation of Chinese consumers will spend far more, emboldened by rising wages and government efforts to build up the social security system. To a certain extent, they are correct.
“Whatever money I make, I spend …?we don’t have to worry about saving for old age like our parents,” said Jiang Qiong, 24, manager of a jewellery shop in Tianyi.
With shoppers like Ms Jiang, Chinese retail sales have risen about 17 per cent annually for the past couple of years. The growth is impressive – but hardly enough to fill the 760 shopping centres that Mr Guo forecast will open across China over the next three years.
Sourced & published by Henry Sapiecha
