Tencent bets China’s shopping malls can be fashionable again as it leads $5.4 billion Wanda deal

China’s top think tank predicted in 2016 that one in three of the country’s estimated 4,000 shopping malls would close within five years as consumer spending shifted online and millennials prefer swiping through websites than ruffling through clothes racks.

Tencent Holdings, together with JD.com, Suning Commerce and Sunac China, is out to prove the forecast wrong, with a 34 billion yuan ($5.4 billion) investment in mall operator Wanda Commercial, in what’s been billed as one of the largest deals between internet companies and physical retail that will create a “new consumption model” integrating online and offline services.

The investment is the latest in a collection of assets that Tencent is putting together as it seeks content and spending avenues for its almost 1 billion social-media and mobile payments users.

“Tencent, if [the company] wants to retain its strong growth, has to exploit new areas or step into its competitors’ territory,” said Li Yi, chief fellow at the Shanghai Academy of Social Sciences. “The story is the same for Alibaba.”

Led by Pony Ma Huateng, Tencent’s foray into retail has meant it increasingly competes head-on with Alibaba Group, China’s biggest e-commerce company founded by fellow billionaire Jack Ma Yun.

Ma has put forth what he calls “New Retail” as the way forward, in which the lines between online and high-street browsing blur. Recommendations are pushed to shoppers in stores and purchases are made online with deliveries sent to their homes in seamless transactions, for instance.