There’s nothing China can’t make in abundance and often in excess — even shopping malls.
Across the United States, one in six shopping malls has closed since the sector peaked in 2013. But China has been on a frenetic construction boom, with its number of malls doubling since 2013 to 6,700.
Many retailers in China are now feeling the consequences of that overbuilding. While some Chinese malls are thriving, others are withering from lack of customer traffic.
Apple this month closed its store in the InTime City mall in Dalian, a port city in northeastern China. It was a first for Apple in the country, where the tech giant operates dozens of retail locations. Apple’s second store in Dalian, at the Olympia 66 mall just 1.6 miles away, has remained open and even taken on employees from the defunct store.
All over the world, shopping malls are wilting under fierce competition from e-commerce. The competition is especially fierce in China, where home delivery is particularly cheap and convenient. An estimated 10 million people work in delivery, many on electric scooters, but some are starting to use self-driving trucks and even drones.
The real problem in China’s shopping mall sector, as it is in much of China’s real estate sector, is years of frenetic, debt-fueled construction. Developers have continued a building blitz despite a sharp slowdown in retail sales that started during the Covid-19 pandemic and has continued since.
One reason for the continued construction of malls is China’s tax system. Local governments, which have enormous influence over what gets built in their jurisdictions, derive considerable sales taxes from malls. Apartment buildings, on the other hand, pay almost no annual real estate taxes. So local officials often require that new malls be included in big real estate projects, and the construction isn’t stopping.
Last year alone, 430 malls opened across China. By contrast, the United States, which has a quarter of China’s population, now has 1,107 malls, according to CoStar, a commercial real estate data firm.
Ron Johnson, who founded Apple’s retail business as a top aide to the company’s longtime leader, Steve Jobs, said that even before he left Apple in 2011, he could tell that China was building more malls than it needed.
“Developers all over were putting up significant malls, and you knew they weren’t all going to make it,” Mr. Johnson said.
A close look at the InTime City mall and Olympia 66, as well as five other malls in Dalian, shows how the mall sector across China is rapidly dividing into winners and losers.
The InTime City mall is one of the losers. The entrance to Apple’s former store, which opened in 2015, is blocked by white boards. Along the same hallway, the storefronts of a former Boss clothing store and shops of other brands are closed with signs that say “Coming Soon” in English and Chinese without any other information.
The InTime City mall declined requests for comment. Local media has reported that the mall ran into a financial crisis in 2022, near the end of China’s almost three years of “Covid zero” lockdowns and quarantines, and has been the subject of litigation since then.
A nationwide crash in apartment prices after Beijing tried to rein in a decades-long real estate bubble has erased much of the savings of China’s middle class, leaving it reluctant to spend. Not only malls are hurting: Two-thirds of department stores also experienced falling sales and profits last year, according to survey results released in April by the government-affiliated China Commerce Association for General Merchandise in Beijing.
“The core issue can be attributed to declining customer flow and spending power,” the report concluded.
Dalian itself is doing better than many cities, however. It is home to manufacturers of factory equipment and builders of naval warships, national priority industries that benefit from billions of dollars in investments. It is also a tourist destination. Retail sales climbed 7.4 percent in Dalian in the first half of this year compared with the same period last year.
Jerry Mao, an owner of Shanghai Tang, a luxury clothing and lifestyle retailer, said Dalian was an attractive market, so he is actively looking at the city’s malls to choose one for a new store. He said he would not choose InTime City because other malls in Dalian had more energy and customers.
“The good malls have always done well in China — bad malls cannot survive,” Mr. Mao added.
For Apple, the challenges in China are not limited to picking the right malls for stores. Apple faces competition from Chinese-made devices, as well as broader headwinds from weak consumer spending. Many customers now choose Chinese smartphone brands like Huawei and Xiaomi.
A government cash-incentive program for consumers to buy manufactured goods has helped producers of everything from smartphones to electric cars. For the three months ending in June, Apple’s sales in mainland China, Taiwan, Hong Kong and Macau were up 4.4 percent from a year earlier, and its operating income was up 4.7 percent.
Apple said it expected to end the year with 58 stores in China, the same number it had in January. It closed the store at the InTime City mall after other retailers there had closed, it said.
The InTime City mall opened in 1999 as the Parkland Mall in what was Dalian’s most fashionable neighborhood. It was on the city’s best-known shopping avenue in a century-old historic neighborhood with narrow streets.
Ji Haidan, a neighborhood resident, still remembers when he first saw the newly built mall’s glass wall facing pedestrians. “This was a very high-end mall,” he said, standing near the closed Apple Store.
The area around the mall has changed. When it opened, Dalian had fewer than 175,000 registered vehicles. Today the city has 2.17 million cars and trucks, and the number is projected to keep growing.
Dalian residents and tourists try to beat the traffic by using the city’s new subway system. But the InTime City mall was marooned by the city government’s decision to open two subway stations several hundred yards away and not right underneath it. Malls on top of those subway stations were full of visitors on a recent afternoon.
“Parking is a real problem right now, so when everyone can travel by public transport, they can avoid traffic jams,” said Dou Xue, the deputy general manager of the Dalian MixC mall, which is on top of another subway station.
Like malls in the United States, Chinese malls are turning to entertainment and restaurants to lure people out of their homes.
In Guangzhou, the commercial hub of southeastern China, the Grandview Mall has attracted crowds by opening an extensive aquarium. In Dalian, the Pavilion Shopping Center recently arranged for a local music school to hold a children’s music competition before lunchtime, hoping parents would stay for a meal.
The InTime City mall, like many older malls in China, has about one-sixth of its space devoted to eateries. Newer malls, like the bustling Pavilion and Olympia 66 malls, fill almost a third of their space with restaurants. Dining out cheaply is one of the brighter spots in Chinese consumer spending these days.
Gift shops also remain popular with a key audience at Chinese malls: young women and teenage girls. Gu Meilin, a young Dalian resident, prowled a gift shop at the Pavilion mall this month.
“Small, delicate items like this attract me,” she said, “and we girls prefer such places where we can hang out and look around.”
Li You contributed research.
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He lived and reported in mainland China through the pandemic.
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