The Great Mall of China


They do things really big there. And why not? They've got a major portion of American wealth, they control American consumer business and they own America's financial destiny.

You've guessed I'm not talking about Texas. Or California. Everybody has known for a long time that China, with its immensely vast and humungous population spread over a huge chunk of the earth's surface, would dwarf everybody else if they ever got their economic act together. Guess what? They have.

They already produce a major proportion of the consumer goods sold here. Now they're not just making and selling, they're buying.

The largest shopping mall in the world is the Golden Resources Mall in Beijing. There are four malls in China larger than the Mall of America, the biggest in the U.S. West Edmonton Mall in Canada held the title of the world's biggest for several decades, but now there are two malls that are larger in China. By the end of this decade, China is expected to have at least 7 of the world's 10 largest shopping malls.

The South China Mall, complete with replica of the Arch de Triomphe, is three times the size of the Mall of America. It opens soon.

And Chinese consumers flock to them---by train, bus and increasingly by car. One mall is visited by 600,000 consumers in a single busy day. "Forget the idea that consumers in China don't have enough money to spend," said David Hand, a real estate and retailing expert. "There are people with a lot of money here. And that's driving the development of these shopping malls."

You may or may not have noticed that a lot of the consumer goods sold in American stores are made in China. The relationship of China to Wal-Mart, the world's largest business as well as the world's largest consumer outlet company, is incredibly tight. And Wal-Mart sets the standard for competition these days.

Then there's the little matter of the U.S. debt. This country's preposterous budget deficit hasn't collapsed the economy yet principally thanks to China. Lots of money is flowing into China for their consumer goods, which normally would raise the value of their currency. But that would make their goods cost more here in the land of buy now, buy forever. So China uses some of that inflow to buy U.S. dollars and essentially bankroll the Bush administration's war expenses plus the tax cut for the wealthy. All that helps support America’s buying habit.

Cynics might suggest that having centuries of experience in opium, the Chinese are adept at feeding addictions. They certainly are taking good care of their U.S. consumption addicts.

It all works great for the wealthy in the U.S., and for product consumption, although buying health care etc. is not so easy for the non-wealthy, and as manufacturing jobs disappear to China and service jobs to India and elsewhere, the gap grows and grows between the few who are wealthy and the rest of us.

So while the fading middle class in the U.S. hangs on with cheap stuff from Wal-Mart, the rich here are rolling in it, and the Chinese go to the malls. They can afford it.

Sooner or later, China will cut back on the money supply, probably when the economy here is so bad that U.S. consumers can't even buy enough cheap stuff from Wal-Mart to keep the Chinese factories humming. They are already experiencing some problems with workers who aren't content with bad pay, and even want to form unions (which the putatively Communist government can't really oppose, though they can try to control any collective action.)

When the Chinese pull back, everything they finance--including the housing bubble---bursts. That will hurt what remains of the middle class. The big beneficiaries of the Bush tax cuts won't suffer much. They're diversified, they've got property everywhere outside the country, and they've got the scratch to travel. So even if the malls all fall down here, why worry? They've got some great malls in China.