China is suffering from a glut of new shopping centres, with the result that unenthusiastic shoppers are being tempted with cut-throat discounts and knock-down bargains. And when that fails, the malls are now simply shutting down. Over the past 18 months, 10 large shopping centres in Peking have closed.
All this is unseasonal bad cheer for China's retailers. The run-up to the Lunar New Year, which on Wednesday launches the Year of the Tiger, is supposed to mean bonanza sales. But rather than starting with a roar, retail trade is more of a whimper this year, amid soaring unemployment and worries about the financial meltdown.
It was not only foreign manufacturers of consumer products that went weak at the knees a few years ago at the thought of 1.2 billion Chinese shoppers; the property companies also embarked on grandiose developments of retail space. In Peking, all these shops are now coming onstream, and there are 80 big stores, with more scheduled to open this year. Sun Dongan Plaza last Sunday opened 50,000sqm of stores, a five-floor emporium with 107 elevators totalling 4km. The final development will be 220,000sqm.
The timing could not be worse. Growth in retail spending last year fell to 11 per cent, and stores suffered the most. According to the most recent official figures, during the first 10 months of 1997, sales in China's 151 biggest department stores fell by 46 per cent, profits collapsed by 59 per cent, and 15 per cent of them are now losing money. The luxury end of the market has been particularly badly hit.
It is bad news for the Chinese economy. The official forecast is for GDP growth to fall from 8.8 per cent in 1997 to 8.0 per cent this year, but most analysts say it could go lower. The main engine of China's growth remains domestic demand, but its population of prodigious savers are keeping their money in the bank. Stockpiles sitting in China's state-owned factories jumped to record levels last year, partly because some state-owned industries are churning out goods that no one wants, but also because forecasts of demand have been over-optimistic.
Shoppers have proved keen bargain hunters. In one small, low-price outlet, a woman had just bought a pair of trousers for less than pounds 5. "I use Chanel No 5 perfume but wear 60 yuan [pounds 4.50] trousers. Does it matter? I'm still modern," she said.
Families whose bread winners are state enterprise workers are nervous about spending money, with 1998 marked for widespread redundancies as the state-sector restructuring begins. According to the China Reform Daily, 12 million workers havebeen laid off by state factories.
For Sun Dongan's opening last Sunday, many came to window shop, few to buy. The "London Fog" fashion shop's assistants stood around gossiping. In the Sea Sky hardly anyone was even looking. Ask the assistants how business is going, and they shake their heads. "Too few customers," they shrug, in what is likely to be the refrain of 1998.