China's supersized mall

For sale: everything. Goat-leather motorcycle jackets, Italian bathroom sinks, hand-made violins, grandfather clocks, colonial-style desks, Jaguars, diapers. And that's barely getting started.

It takes about two days to explore Beijing's new Golden Resources Shopping Mall - the world's largest. Minnesota's "Mall of America" is 4 million square feet. Golden Resources, built in an impressive 20 months and opened Oct. 24, is 6 million square feet.

With 230 escalators, more than 1,000 shops, restaurant space the size of two football fields, and a skating rink - the Art Deco mall is a testament in glass and steel to the communist party's desire to create a stable, happy, middle-income consumer class.

China's big appetite for budding sales combined with major loans from its highly centralized banking system is one form of the expression "market Leninism," used by Perry Link of Princeton University to describe China's hybrid red capitalism.

"From the beginning we wanted the largest shopping center in the world," says Fu Yuehong, general manager of the New Yansha Group, which operates nearly half the mall. Ms. Fu displays a huge map of the world in her office. "We are the country with the most people in the world. We have the fastest growing economy. The largest mall shows our progress as a society."

The "mall that will change your life," as it's advertised, sits in a forest of new high-rise apartments outside Beijing's third ring road. Many flats are empty, part of an overheated building spree. They stretch for blocks in a rebuilt district near Beijing's energetic "Silicon Valley," where most of China's ruling Standing Committee live.

The mall, partly done by the Atlanta-based firm of Smallwood, Reynolds, Stewart and Stewart, stems from the Communist Party's push for a "xiao kang" society, a term that picks up traditional Chinese dreams of prosperity - a car in every garage, a chicken in every wok.

Malls, those US-derived temples of consumerism, were once nonexistent in communist China. But they mushroom so fast today that even Premier Wen Jiabao warned this summer of a "shopping mall craze."

A half-decade ago, only a few dozen malls existed. Now a Ministry of Commerce study counts 400 malls in China, and a private sector study finds more than 500. The cost is between $24 and $36 billion. Shopping malls are seen as part fad, part pork barrel, and definitely one of a series of new big-ticket, semipublic "image projects" - something every self-respecting city argues for as essential for trade, tourism, and jobs. In developing China, that list includes airports, suburban townhouses, skyscrapers, golf courses, hotels, subways - all of which at one point were deemed a craze by officialdom. Beijing now has, for example, 24 golf courses - despite chronic public-water shortages.

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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