Riot signals China's property fears

[FT_news]

A property developer's offices have been vandalised by unhappy customers at a time of mounting evidence that the market is faltering, and the trouble could be an indicator of more problems to come

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Few Chinese companies have been more adept at targeting the aspirational middle class than Vanke, the country’s biggest property developer. On the outskirts of Hangzhou, the company is putting the finishing touches to a gated community called “A Glamorous City”, aimed at young professionals in one of the hubs of China’s private-sector economy.

Yet the showroom at A Glamorous City is closed after a group of customers vandalised it at the weekend. At Vanke’s office in central Hangzhou, a city in eastern China’s Zhejiang province, two armed security guards in faux-army fatigues block the front entrance after another group of customers trashed the premises on Sunday, destroying furniture and overturning desks.

The demonstrators came in search of compensation. Having already paid for yet-to-be-completed Vanke apartments, they were irate that the company was now offering discounts of up to 25 per cent on similar properties.

“There seemed to be so many of them and they looked like they wanted to tear up the place,” said one Vanke employee in Hangzhou on Wednesday.

The mini-riot could be just one of many flashpoints in Chinese cities featuring people with little confidence in the legal system. But it comes at a time of mounting evidence that the property market is faltering, Vanke’s vandalised office could be an indicator of more problems to come.

The fate of the Chinese property market is being closely watched around the world. For a start, it could have a big impact on the Chinese economy. The export sector, one of China’s growth engines, is already battling against higher costs and weaker markets. If a slump in the property market drags down domestic investment – another of the main engines – the economy might suffer a hard landing rather than the gradual slowdown the government is hoping to achieve.

Moreover, given the huge scale of the Chinese property boom, which stretches across dozens of cities with more than 1m people, a weak market will have an impact on global demand for commodities such as steel, iron ore and copper.