Monday, October 18, 2021

Closure of China malls ‘brings pain’

The announcement to shut down 150 malls by mid-year could create a chain reaction, because they are so intertwined with their landlords

By Ralph Jennings

BBC News, Guangzhou

Evergrande Real Estate Group has said it will shut down nearly all of its 50 biggest department stores and over 150 malls across China to improve profitability. The plan could mean many small-scale business premises and many small family farmers are closed too. The developer which also owns English Premier League club Chelsea, denied that the closures would affect the larger numbers of its 5.5 million small staff and 250,000 farmers who work in its estate. But critics see it as a move to squeeze out the small-scale landlords and farmers who are now most closely linked to Evergrande. ‘No place’ The Chinese government in particular has identified small and medium-sized businesses as a growth sector for new jobs. Mainland Chinese developers are also investing in retail property The problem is that due to Evergrande’s unusually rapid expansion – and the credit crunch in China – Evergrande’s owner and executive chairman, Wu Yajun, has always had enough cash flow to meet its debts, but by forcing closure of many of its biggest properties, he is shifting the problem onto his lenders. Meanwhile Evergrande’s bigger tenants at many of its malls are now under mounting pressure from Evergrande to find a new landlord. Closed in January 2001, the Zhengshi Plaza and under one acre of land in Henan province was originally bought for a small amount. But Evergrande is now set to evict all of Zhengshi Plaza’s 51 tenants because they refuse to pay the necessary annual rent. “My salary (about 200,000 yuan ($32,900) every month) is in a bag tied to the wall. We have nowhere to go,” said 27-year-old restaurant worker Zhang Zengying. One of the landlords of the shopping centre said that Evergrande “deserved” to close its properties in the end. But he said “their other strategy is to ‘relocate’ its staff, farmers and landlords. “Everyone is under pressure now.” An official from Zhengshi is relieved that the state was finally intervening to clear up the mess. “Evergrande should have done this sooner. All the property value has been confiscated. What’s the point of it all?” But there is unlikely to be much relocation at Zhengshi Plaza. Mr Zhang has no interest in going to work elsewhere and if he could, he would just stay in his one-room flat and work at the cafe owned by his uncle. Both those businesses are at the front of the plaza with no chance of being moved elsewhere.

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