China's giant, deserted malls wait for reluctant consumers

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When the New South China Mall opened to great fanfare in 2006, it immediately became the world's largest shopping centre by floor space, knocking the West Edmonton Mall into second place. Newsweek magazine believed it to be one of the seven "new wonders of the world," visitors are reminded in a video that plays on an endless loop over one of the mall's many entrances.

Five years later, the New South China Mall has achieved a very different, unforeseen notoriety. With an occupancy rate of just 2 per cent, the 660,000-square-metre New South China Mall is one of the world's emptiest shopping destinations and one of the biggest white elephants ever built.

The 2.1 kilometres of Venice-style canals that wind through the mall's heart are lined with stores that closed soon after the splashy opening. Advertisements promising "Fashion 2006!" hang beside naked mannequins in one deserted clothing shop. Long rows of stalls never even saw a tenant. A half-dozen gondolas that were supposed to transport tired shoppers from one wing of the giant mall to the next bob unused beneath the mall's stone "San Francisco Bridge," the gondoliers nowhere in sight.

In several hours of wandering the mall's vast acreage on a Saturday afternoon, only a handful of shoppers could be seen.

It's a long way down for a complex that was hailed five years ago as proof that China's economy was finally transforming, and that a sizable chunk of this country's 1.3 billion people were finally feeling wealthy enough to open their wallets a little. As Chinese began to spend, the hopeful thinking went, this massive market would more than cover for slackening demand in the West.

With the global economy on the brink of a second recession in three years, it's clear that China's consumption revolution hasn't yet come to pass. While the overall economy has grown nearly 10 per cent a year since then, much of that was driven by investment and construction that many see as camouflage for a lack of genuine growth.

Private spending, which accounted for just 35 per cent of China's gross domestic product in 2006 – by far the lowest of any major world economy – has barely risen to 36 per cent today, according to International Monetary Fund figures. Consumers in China are also more reluctant than in the West to borrow money for luxuries, with less than 1 per cent of urban Chinese using consumer loans to purchase consumer goods. Chinese save between 25 per cent and 50 per cent of their income. That leaves a lot less money to spend at the mall.

"Sometimes tour groups come here from [nearby cities]Guangzhou or Shenzhen," said Hu Xiaocui, a bored ticket taker at the Teletubbies playroom that is the only functioning business on the mall's third floor. "But they don't show them the empty parts."

Only 47 of an astonishing 2,350 retail spaces are filled, the most successful businesses being McDonalds and KFC restaurants near the mall's front entrance. Fast-food wrappers and empty paper cups litter ghostly hallways in other parts of the complex. The elevators and lights are switched off, and voices echo off atrium ceilings four storeys high.

"We only sweep near the Teletubbies playroom. The other floors – what's the point?" laughed a member of the cleaning staff. "No one ever did any shopping here, even when there were stores. It was too expensive."

The most curious thing about the New South China Mall is that it's far from unique. Largely empty megamalls are an increasingly common sight in cities around China. More are being built, even as millions of square metres of retail space already sit empty.

In the trendy Sanlitun neighbourhood of Beijing, five shopping complexes sit within two square kilometres. While they haven't had Dongguan's problems in attracting tenants, shoppers aren't following the brand names to Sanlitun, which is one of the wealthiest enclaves in China. In the upscale Village North mall – which hosts Versace, Longchamp and Emporio Armani stores – the occasional shoppers are outnumbered by phalanxes of bored employees. The 14 towers of the even newer Sanlitun Soho project sit mostly empty just two blocks away, while Pacific Century Place department store, another block east and once the area's trendiest place to shop, will shut its doors next month.

"These malls are built by property developers, not retailers. They're not looking at the market or market demands. There's an 'if-we-build-it-they-will-come' attitude," said Matthew Crabbe, co-founder of the Access Asia market research group.

Even by China's standards, the New South China Mall was particularly ill-conceived. A high-end shopping destination was always a stretch for Dongguan, a factory city of six million people in southern Guangdong province that relies on low-cost labour imported from other parts of China. Just past its fifth birthday, the mall's exterior paint is already starting to peel off its faux European architecture. Rivers of rust streak down from the railings of the emergency exit staircases.

An employee in the promotions section of Sanyuan Yinghui Investment and Development Co. Ltd (the company that manages the property on behalf of developer Beida Resources Group) said it was "not convenient" to talk about why so much of the mall sits vacant. "The staff has changed many times since the beginning. I have no idea why they chose Dongguan [as a location]" said the employee, who would only give his family name, Tang. "I have no idea what the original plan was."

Whatever happened, it seems few lessons were learned from the debacle of the South China Mall. Across a narrow street from the complex's back entrance, machines dig at the dirt on another Beida Resources mega-project.

"Acme River Bank Villa" a sign on the surrounding fence reads, followed by an aptly mistranslated slogan. "Luxury is specious."