Luxury home prices in Shanghai are crashing in the wake of the 20th China Communist Party Congress that saw President Xi Jinping being elevated to the status of Mao Zedong and bestowed with another five-year term.
The wealthy people, both Chinese and Taiwanese, are selling off their luxury apartments and leaving the city as there is increasing concern about the direction of the economic and political policy during Xi Jinping's third term.
People Dumping Luxury Apartments
"People are dumping apartments; prices of many luxury homes have fallen by 30 or 40 percent compared with market prices [before the party congress] ... They are all getting out; they are worried it will be too late if they don't sell now," the Radio Free Asia quoted Shanghai real estate broker Zhao Ting as saying.
Xi Jinping amassed near total powers at the just concluded Party Congress. While a third term for Xi was factored in by the global markets, the way the president stacked the senior leadership team with his die-hard followers shocked the observers.
Yuan and Markets Crash
Immediately after the 20th Party Congress ended, Chinese stock markets crashed and the yuan tumbled. The market reaction clearly showed that the limitless powers that Xi has given himself have spooked the business community and the investors.
Unlimited powers to Xi will enable him to make policies that hurt businesses, some analysts said, while others said a highly centralized power centre will bode ill for the economy. "The market is concerned that with so many Xi supporters elected, Xi's unfettered ability to enact policies that are not market friendly is now cemented," Justin Tang, head of Asian research at United First Partners, said, according to Bloomberg News.
RFA says that online advertisements showed the asking price for a large penthouse in the Chateau Pinnacle development was 35,990,000 yuan, compared with 60 million yuan in September. Many of the prices listed are 'negotiable', hinting at the desperation of some of the sellers.
Similar Trend in Other Cities
Other real estate brokers have also noticed a similar trend in other large Chinese cities. Zhou Ning, a real estate broker in Hubei, told RFA that rich people are selling off properties in cities like Wuhan, Beijing, Jiangsu and Zhejiang.
"Large numbers of rich people are now selling off their assets in China, especially wealthy people in Shanghai and Beijing ... A lot of their privately owned assets are being bought up by state-owned enterprises ... Some of my friends have bought up hotels and restaurants from Taiwanese ... Taiwanese people feel that there has been a change of policy direction, so they are selling," he said.
Political observers estimate that Xi's third term will see the rolling out of policies that seek to cement state control of the economy, the curbing of the influence from the private sector and limiting private wealth.
Targeting Private Wealth
Even before the Party Congress, Xi had taken up a fight against huge private corporations like Alibaba and Tencent. In the immediate aftermath of the Party Congress, tech giants like Alibaba Group Holding Ltd., Tencent Holdings and Meituan saw their shares tumbling. All these companies had been in the cross hairs of Xi in the last several years. There are increasing concerns among investors that with Xi in the helm for another five years, these companies will face more scrutiny and bear the brunt of state repression.
The RFA cites Zhao Ting as saying that most of the wealthiest people in Shanghai have already left the country or transferred their assets abroad. "There is no longer any illusion of hope for the future under the current leadership ... And it has become clear to everyone that they will continue to develop the zero-COVID policy..." he says.
Planned Economy Coming Back
The agents are saying that there is a silent nationalization drive underway and the old days of the planned economy are back. "Since the Chinese Communist Party's 20th National Congress, they are adopting a new planned economy model," Zhou reiterates.
RFA also reports that, according to business news website Yicai, local governments in the country are boosting the purchase of residential property by state-owned enterprises. These residential properties are earmarked for allotment to local people.