The South China Mall opened nearly 6 years ago. Nearly 3 times the size of Minnesota’s vast Mall of America in the USA, it supposedly symbolised China’s arrival as a consumer power.
But as this Australian TV video shows, the Mall today is virtually empty. As are numerous other shopping malls built more recently. Yet it was supposed to attract 70000 shoppers every day.
This is because China’s drivers of economic activity are different:
• The phrase ‘middle class’ doesn’t mean the same as in the West, where average GDP/capita West is ~$40k. In China it is only a tenth of this. 94% of taxpayers earn less than $8k a year.
• Equally, China’s reported GDP figures reflects its status as a ‘command economy’. Its GDP figure is a target for the regional party bosses to achieve, not a statistical report.
China’s construction activity has been a great growth story for the chemical industry. But there are now 64.5m empty apartments and houses in China’s urban areas. These have been bought speculatively, on the basis that “the government would never let prices fall“.
Yet food inflation at 11.7% means the government risks serious social unrest if it fails to tighten economic policy and lending. But if house prices then begin to fall, what happens next?