TO say that New World Development's recent retreat from its Beijing retail project was a result of China's credit crunch would make a splash - if that were the case. This week, a New World official confirmed that the company had decided not to go ahead with the $700 million department store project in the capital's Xidan shopping district. The reasons for the pullout, according to the official, were that the mainland's property market would suffer under the austerity programme and land prices in the big Chinese cities would fall to a more reasonable level. The mainland partners' lack of cash due to credit tightening by the Chinese banks would also slow the building of some properties, he said. Although the official's explanation is fine, it might not be the whole truth. With the letter of intent struck in the middle of last year, the Xidan project represented New World's foray into mainland retail property. During the last 12 months, the property group had made great efforts to get the project off the ground. However, as early as the beginning of this year, the project was known to have encountered serious problems with resettlement, while New World and the potential mainland partner could hardly agree on the land premium. The problems were very similar to the ones with Kerry Group's huge commercial development next to Beijing railway station. In the wake of the property boom, the mainland partners were understood to be in a sanguine mood. Their offer on the land premium and other terms were found unacceptable by the Hongkong investors. Kerry Group withdrew from its project a few months ago. It was only a matter of time before New World followed suit. Perhaps it is fair to say that the Xidan project was ill-fated from the beginning, regardless of whether the Chinese Government had launched its austerity programme or not.