One of the main attractions of Deji Plaza, a shopping centre in Nanjing, is its toilets. An artsy wing of the mall features absurd lavatories over six stories. On level three they are decked out in mesmerising neon lights; two floors up they boast sparkling gold designs and a grand piano. Visitors travel for hours to see the extravagance. And they are not just running to the restrooms. Deji was the highest-grossing mall in China last year, with 25bn yuan ($3.5bn) in sales. By some counts, it was the highest-grossing in the world.
Busy malls such as this are a rare sight in China. Consumer sentiment has been in the dumps for years and is only worsening. In October retail-sales growth slowed for a fifth consecutive month. So Communist Party officials are now pinning their hopes on a Deji-like solution. The state’s leaders believe that by increasing the quality of supply they can create healthier demand. They theorise that Chinese consumers are suffering from “latent demand”, or desires for goods and services to which they do not yet have access—as indicated by high excess savings. Offering up the right stuff, or so the state’s thinking goes, would unlock these squirrelled-away funds.
Indeed, a plan for reviving consumption, released on November 26th, is almost entirely focused on supply rather than demand. It insists that shopping venues should feature more cute goods such as the those sold by Pop Mart, maker of Labubu dolls, and calls for more immersive “experiential” shopping venues to attract visitors. (It is silent on whether these should be based around toilets.) Another recent plan said that shopping centres should be made easier to access from residential areas and encouraged diversifying the type of shops with “pop-up” stores and outlets for fans of anime, games and e-sports.
Why are China’s leaders freelancing as retail consultants? It is not out of any great love for shopping. They are firm believers in China’s manufacturing base as the core driver of economic growth. When they introduced a household-appliance trade-in programme last year, ostensibly to boost consumer demand, economists noted that it channelled spending to specific areas of industry. Their latest proposals look like another attempt to avoid the difficult measures that would be required to boost China’s consumers—ones that might tilt resources away from manufacturing.
True, Deji is fulfilling some latent demand. Although Nanjing is in the centre of one of China’s wealthiest regions, many surrounding cities do not have such fancy malls. Residents of Hefei, a manufacturing hub an hour by train to the west, for example, are said to be the most frequent customers. But to confuse the country’s broader weakness in consumer demand for shortcomings in supply would be a mistake, says Zhu Tian of the China Europe International Business School. The quality of China’s supply has, in fact, increased notably in recent years, as can be seen in the growing success of local Chinese consumer brands. This would surely have led to an increase in consumption if the wider problem was truly latent demand.
Wu Xiaoqiu, formerly of Renmin University, has pointed to weak employment as one of the culprits for meagre consumption. A grinding property crisis, which has pulled down home valuations, has made even the rich feel poorer and less willing to spend. Mr Zhu suggests that the state ought to unleash 4trn yuan of consumer stimulus to jump-start demand. The structural pressures weighing on China’s economy are serious. It will take more than gleaming lavatories to ease them. ■
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