China's consumption

The Di Mei shopping centre in downtown Shanghai is a surprisingly depressing place to shop. The underground mall is located in one of the most shopping-mad cities in China, and yet it is run down and starved of customers.

Rising vacancy rates and plummeting rents are increasingly common in Chinese malls and department stores, despite official data showing a sharp rebound in retail sales that helped the world's second-largest economy beat expectations in the third quarter.

More importantly, the struggles of Chinese brick-and-mortar retailers amplify a policy conundrum; these malls, built to reap gains from rising consumption, are instead adding to China’s corporate debt problem, currently at 160% of GDP - twice as high as the United States.

China is currently the site of more than half the world's shopping mall construction, according to CBRE, a real estate firm, even though it appears that many of these malls will not produce good returns for their investors. A joint report by the China Chain Store Association and Deloitte showed that by the end of this year, the total number of China's new malls is projected to reach 4,000, a jump of over 40% from 2011.

Real estate analysts note that much of the surge in retail space construction came at the behest of local governments, who were rushing to push real estate development as part of attempts to stimulate the economy. The result has been malls built in haste and managed poorly. Less foot traffic means cash flow of mall owners and developers are getting squeezed - a potential hazard for an economy growing at its slowest pace in decades.

Not surprisingly, shoppers are voting with their feet.