China's supersized mall

Malls are often financed in speculative deals, according to state media and Western experts, where family contacts are more important than a real business plan, and where banks are freighted with the risk. Often, land is obtained in sweetheart deals. China's bank-loan default rates regularly run over 30 percent. A pop-expression, "working mah-jongg," was coined to describe how developers can easily charm state bankers into big-dollar loans.

"A developer can get a large loan from state banks merely by showing a paper government license to build a mall," pointed out an unusually frank Xinhua report this summer that listed both the pros and cons of malls.

Because of Golden's scale and its "showcase" identity, developers conducted a more transparent approach. Three heavyweight corporate groups share the space and cost. The entire west wing is devoted to xiao kang-style home products for "easy living" - a cross between Home Depot, Ethan Allen, and Rooms to Go. Except, of course, bigger.

The observable problem with new shopping malls in China, however, is that they have few shoppers. While Golden officials first estimated 50,000 people a day, only a tiny fraction of that figure can be seen.

On a recent Friday afternoon, only 20 shoppers were counted in one hour. There may currently be too many high-end malls, and not enough high-end earners, in urban China, some experts say.

Pedigrees run from a Macy's-style department store to shops with names like Ralph Lauren, Papa John's Pizza, and Chanel. (Wal-Mart was invited but negotiations reportedly broke down after 30 minutes.) A Beijing-based US executive suggests that name-brand shops regard nonearning stores as a form of advertising and "positioning for the future."

A deficit of shoppers has been in evidence for several years. Many Chinese visit fancy local malls that feature state-of-the-art buying environments with limpid pools of interior soft light and pale, polished floor tiles that glow pleasingly. But few cash registers ring. Mostly, ordinary Chinese buy 10-cent soft cones and have fun wandering amid the goods.

Disposable income is rising, but not nearly as fast as the new malls. At a cosmetics shop in Golden Resources, tiny tubes of face and eye cream were on sale for $40 each. But an attendant admitted - no sales that day. Literally thousands of clerks staff Golden's floors, and managers race about with clipboards. Two professionally dressed young ladies, potential shoppers, said they came to visit a friend who worked there. "We really like how we feel at this store, but we can't afford the clothes. The cost is 200 rmb [$24] too high for nearly every item."

"We think it will take three to five years to start making a profit," Fu says. One successful move has been to put a regular-price supermarket, Lotus, in the basement.

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