China’s empty shopping malls

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?

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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One Response to China’s empty shopping malls

  1. Joan Barbot 27 April, 2012 at 8:57 am #

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