A giant eight-storey concrete and glass building stands in the centre of Zhengzhou, dark and deserted. The day the red and white 'Asia Five-Colour Shopping Centre' opened in autumn 1996 was one local people cannot forget. Thousands crowded the square in front, a band played and the mayor came to open one of China's biggest department stores, with 645,600 square feet of space. It was open just 18 months and shut on May 6 last year. It remained closed until January 16, when the ground floor reopened, let out to factories to sell their wares for 10 days ahead of the Lunar New Year. The brief history of the building is the most spectacular failure of its owner, the Asia Group, a local company sinking under debts of more than 600 million yuan (HK$561 million) because of bad investments, poor management, ill-advised decisions by local officials and banks and possibly corruption. Its two founders, Wang Suizhou and Jin Ye, no longer live in Zhengzhou and are believed to be in Guangzhou, Zhuhai, maybe Hainan or even the United States. It is also a story of the mad property bubble in China's cities, with a flood of new and unwanted commercial and office buildings. To walk round the building provokes a feeling of sadness. The makeshift counters are crowded with surplus goods - lipstick for five or 10 yuan, men's pyjamas for 20 and women's trousers for 35 - and the sales staff, sent from the factories, are cold and abrupt. You see reminders of its former splendour - the catwalk where mannequins used to strut, below a glass dome - and signboards of the former tenants; travel agent, barber shop and 'Hong Kong Hilton Leather Goods'. The group started in 1988, set up by a local property company and a leasing firm under the Construction Bank, and invested 34 million yuan in the 107,600 sq ft Asia Plaza in a prime site in the middle of Zhengzhou, over the road from where it would build the Five-Colour Centre. The Asia Plaza opened on May 6, 1989 and, competing against old and badly run state shops, was a great success. It posted sales of 180 million yuan in 1990 and 230 million in 1991. Its staff wore smart blue and white uniforms and performed drills each morning outside the front door, before raising the company flag - the first time this was done by a Chinese store. The company boasted of the 'Asia Group spirit' of its staff and of its military discipline, with stiff fines for mistakes. Stores all over China, looking for a new model, flocked to Zhengzhou to study and copy. The Henan provincial government was delighted. A landlocked province largely dependent on agriculture, it has little of the wealth and brand names of the coastal areas. It was determined to promote its model child. So, from 1993, the group embarked on a programme of wild expansion, under the slogan 'Take Over Henan, Take Over China and Spread Over the World'. It built department stores in four other cities in Henan and six other cities with 60 per cent of the finance coming from bank loans, just 15 per cent from its own funds and the rest from staff or borrowed from suppliers. The four Henan cities each have a population of less than one million and are poorer than Zhengzhou, where last year the average urban resident earned 5,720 yuan and the average peasant earned 2,530. This led to suspicions the group built them in order to receive kickbacks from the construction firms rather than for good commercial reasons. Two of the four closed in 1997. This expansion coincided with a slowdown in consumer spending from 1993 that slashed prices and profit margins at department stores nationwide. In September 1997, the group removed Mr Wang as general manager and launched an investigation into his financial management. This has not been made public. In January 1998, the Henan government held a meeting on the future of the group. Economics dictated it should be declared bankrupt, but the officials decided this would blacken the good name of Henan and that it had to be saved. They told banks to ease up pressure on repaying loans. But the bad news continued. Its stores in Shanghai, Chengdu, Guangzhou and Beijing closed. On August 14 last year, more than 300 creditors, enraged that they had not been paid, blocked the entrance of Asia Plaza and forced it to shut down for half the next day. In November, four managers from one of its two Beijing stores were detained by police for 15 days after they used money to pay wages to staff instead of giving it to 102 creditors as ordered to by a court. Chen Yinghao is vice-general manager of Asia Plaza, which has been spun off into a separate company. 'We have assets of 270 million yuan and debts of 180 million. We cannot repay the debt out of working capital and are hoping for a takeover by an outside investor.' He estimated the takeover price at about 50 million yuan, taking into account the cost of looking after the firm's 1,091 workers. Sales last year, at 500,000 yuan a day, are one sixth of what they were before 1993. In the store, staff outnumber customers. The mood is of quiet desperation. 'I have been with the firm since it opened,' said one middle-aged woman in the knitwear department. 'Of course I am afraid of losing my job. Many are out of work in Zhengzhou now and it is hard to find a new job, unless you want to be a maid. In 1990 and 1991 business was very good, we could barely keep pace with the orders.' 'Within one square kilometre of us there are now 10 department stores, double the number in 1993,' Mr Chen said. 'This is completely out of control. Zhengzhou only has a population of about one million, plus visitors. The 10 stores are similar and none is doing well, with some losing heavily.' Things will get worse. In the block next to Asia Plaza, a copycat store is about to open. Soldiers train its staff, in blue uniforms, outside in military drills. 'People with no experience of retail think they can make money out of it,' said Mr Chen sadly. 'They do not understand how difficult it is.' The new leader in the Zhengzhou market is the Kingbird department store that opened in September 1997, with 323,000 sq ft of shopping, restaurants and entertainment on five floors, next door to the Five-Colour Shopping Centre. It has a bowling alley, Internet cafe, swimming pool, tennis courts, electronic games, a hall for trading stocks and a play area for children. It is part of an investment of 1.1 billion yuan by the Construction Bank in a block designed to have office space, apartments and a 66-storey five-star hotel. For want of capital, they have not started the hotel. Ren Yihui, a manager of Kingbird, said the provincial government conceived the project in the early 1990s, during a retail boom. 'It was the government that wanted it, not the bank. The bank regrets it now.' Such an investment is now illegal, as banks are banned from investing directly in property. 'We lost money in the first half of last year but made a profit in the second half,' Ms Ren said. She works for a private company set up to manage the store, which pays the bank three per cent of its turnover as rent but which has borrowed nothing from it. Four of the eight managers of the company formerly worked in the Construction Bank. To attract customers, the store gives discounts of up to 50 per cent. From January 18 to 22 it offered 2,500 kilograms of rice for sale at 1.8 yuan per kg, with each person allowed to buy 25kg. On the morning of the 18th, people started to queue at 3am and, when it opened at 9am there were 1,000 waiting. Yang Chengxun, an economist with the local Academy of Social Sciences, said the Asia Group was well managed until 1993, with Mr Wang chosen as one of the 10 outstanding young people in China in 1992. 'But it expanded far too quickly, without the capital or management it needed. Its assets are less than its debts and it should have been wound up,' he said. 'Wang was the favourite son of the provincial government and the banks blindly believed in him. I met him in 1996, he was loud and arrogant and difficult to approach.' Banks were directed by the government to lend to Mr Wang, a practice that is supposed to stop now banks have been declared commercial entities. In the early 1990s the Zhengzhou government promoted the concept of making the city 'a modern trading centre', given its position in the centre of China and at the junction of two of the country's most important railways. 'It was a good idea but there has been too much building,' Mr Wang said. 'And no one predicted how quickly China would change from a seller's to a buyer's market.' Most of China's bigger cities are suffering from a similar property glut, but the problem is worse in Zhengzhou, given its poor population. The empty floors and peeling paint of The Five-Colour Centre are testimony to the waste and stupidity of the company and the officials and bankers who supported it. Nearby, women covered in dirt scavenge through rubbish heaps for scraps to eat and sell. China cannot afford such waste.