Mood swings

Foreign investors are fleeing China

Xi Jinping’s policies are having a profound impact on markets—and a painful one

Jing’an century, a housing development with ponds and lush greenery in north Shanghai, should have been bustling as workers put the finishing touches on flats. Instead the area is silent. A two-month lockdown of the city of 25m people has forced Yanlord, the developer, to halt construction on the site. Homebuyers have been on edge for months as some of the country’s largest developers default on bonds and struggle to deliver homes.

Now Yanlord, until recently deemed in decent shape, is telling customers they will not receive their properties on time. At least 20 housing developments across the city have announced similar delays. Many other projects have been forced to stop selling units. The lockdown has been so severe that roadblocks and police checkpoints have mushroomed. Workers, materials and sales agents have been unable to reach construction sites. Meanwhile, Yanlord’s pre-sales of homes have slumped to less than 20% of the level a year ago.

China’s property crisis is not new. But growing fears among foreign investors of a grand policy disaster are. The combination of a nosediving housing market and Xi Jinping’s uncompromising zero-covid policy is just one recent conundrum that has led foreign fund managers to question whether China is losing its pragmatic approach to managing the economy.

Mr Xi’s insistence on using prolonged lockdowns to rid China of the Omicron variant and his backing for Russia’s war in Ukraine strike many investors as ideological. Add in the timing of his crackdown on tech groups such as Alibaba, an e-commerce company, and on the leverage of property giants such as Evergrande, and it is not hard to see why some of the world’s largest investment groups are questioning the quality of leadership in Beijing. Many attribute this and other campaigns to preparations for this autumn’s Communist Party congress, at which Mr Xi is expected to be granted another five years in office. The events of 2022 could shape how global investors view China for years to come.