China's "Best of Times" -- `Ghost malls' haunt center of Shanghai

`Ghost malls' haunt center of Shanghai

Friday, July 21, 2006

Amid the towering glass-and-steel splendor of the Plaza 66 mall - packed
with boutiques from Dior, Prada, Cartier and other luxury brands - shop
clerk Xu Junyuan idly scratched his bald head as a lone shopper browsed
the deserted aisles.

"I'm just bored," said Xu, who works at the jeans boutique Diesel.

At Fendi, black-suited clerks yawned as they propped themselves against
counters. At the palatial Louis Vuitton shop next door, a seven-foot-
tall plasma television played to no one.

In this populous city of fanatical shoppers, Plaza 66 is what some
locals call a gui gou wu zhong xin - a ghost mall. The prices are so
high that no one buys much. But then, no one really cares.

Just as Stalin erected Potemkin villages to display the glories of
communism to outsiders, Shanghai is creating its own illusion of
prosperity out of the world's most luxurious brands.

Offering cut-rate rents to top-tier fashion houses, this city of about
18 million is determined to make itself look like a world capital of
high fashion. And the Burberrys, Hermes and Chanels are all too happy to
join in the charade.

"Most leading luxury brands will need to have a flagship store in
Shanghai if only to put Shanghai along with London, Paris, Milan on
their bags," said Paul French, founder and China chief of Access Asia, a
marketing research firm in Shanghai.

The illusion is so thin that some stores don't bother to carry much
stock. Others may have clothes on the racks, but they carry just one
size: medium, which is too big for most Shanghai women. Some shops
"don't ring up a single sale for days," Xu said.

Before World War II and the communist takeover in 1949, Shanghai was
often called the Paris of the East - a fashionable cosmopolitan city,
the place to be.

When Mao Zedong emerged victorious in 1949, Shanghai, along with the
rest of China, shut itself off from the rest of the world.

In the last decade, city leaders have sought to regenerate the lost hype
in part to draw foreign investment. And they've been largely successful,
capturing worldwide attention from the media and others who gush about
Shanghai as Asia's most vibrant city, overflowing with wealth and
grandeur. Gleaming malls like Plaza 66 have risen to replace decrepit
neighborhoods.

But Shanghai isn't what it appears to be.

The Shanghai Stock Exchange boasts Asia's largest trading floor inside a
27-story glass building modeled on the Arc de Triomphe in Paris. But the
floor stays largely empty, as trading is electronic.

Costing US$1.2 billion (HK$9.36 billion), Shanghai built the world's
fastest train in 2003, which at a regular speed of 267 miles per hour
beat out Japan's bullet trains. But residents have complained that the
magnetic-levitation train to Shanghai's largest airport is a white
elephant because it doesn't run during hours when many flights arrive or
depart.

Shanghai's upscale malls are another daily reminder that there is less
to the city than meets the eye. "Shanghai is a dreadful retail market,"
French said.

Many of the well-to-do have their assets locked up in property, he said.
Others are too busy squirreling away money for health care, retirement
and their children's education - all signs of a metropolis and a
maturing population.

Government officials who worked with Hong Kong developer Hang Lung
Properties to build the five-story Plaza 66 know that the mall is hardly
bustling with people. "If you walk into Plaza 66, you will find it cold
and cheerless. There's hardly anybody," said Zhang Zuofeng, an economist
with the planning department at Shanghai's Jing An district government.

But he said that Plaza 66's office tower was doing well and that the
complex generated US$80 million in taxes last year.

Terry Ng, Hang Lung's executive director, acknowledged that traffic
wasn't heavy. "Expensive items, man," he said, insisting that the mall
is profitable for the tenants and his company.

Jiu Guang City Plaza, another Nanjing Road shopping center near the
1,800-year-old Jing An Temple, was so keen on attracting Burberry, the
upscale British apparel maker, that it offered the first year rent-free,
brokers said.

Plaza 66 and other malls like it in Shanghai "are solely a window for
these brands," said Chen Jun, manager of commercial real estate at
Shanghai Hanyu Property Agency.

"For Louis Vuitton, the district and municipal government singled out
this brand for Plaza 66," Chen said. So although it has the best
location on the first floor, the French company enjoys one of the lowest
rental rates per square foot. Other tenants pay a percentage of their sales.

Representatives of Burberry, Louis Vuitton and other premium labels
generally declined to talk about individual store sales or lease
arrangements. But, said Grace Chao, a spokeswoman for Chanel in
Shanghai, "not all brands are paying rent."

The real Chinese high-end spending is taking place in Hong Kong and in
smaller mainland cities such as Dalian and Shenyang in the north.

LOS ANGELES TIMES

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