The Chinese economy has become heavily dependent on real estate development over the past decade. High-rise apartments have mushroomed in hundreds of cities to house a growing workforce, while glass and steel office buildings dominate city centers, mimicking the glittering skyline of Shanghai.

Valued at over $ 50 billion after 20 years of rapid growth, Chinese real estate is worth twice as much as the US real estate market and four times China’s annual income.

George Magnus, associate at the China Center at the University of Oxford, says this real estate market ranks as the largest commercial sector in the world.

Executives in Beijing, aware that the boom was running out of steam before the pandemic struck, have spent the past year painlessly trying to bring the burgeoning, largely private-sector industry back to earth painlessly.

Stricter regulations reduced borrowing crises and speculative construction projects began to dry up.

Some companies’ over-indebtedness proved more difficult to manage, especially after it emerged that China Evergrande, one of the biggest developers, owed $ 300 billion.

Funded by a growing Chinese middle class and borrowing from international investors, Evergrande has grown to own more than 1,300 projects in more than 280 cities across China.

Like many indebted companies, Evergrande used new loans to pay off old maturing loans until investors, concerned about its stability, refused to play the game without a huge increase in interest payments.

In recent days, the company’s stock price has plunged, and City analysts believe any ability to evade a government bailout has all but evaporated.

Kaisa is another developer who fell into the same trap. She can’t find investors to fund new loans at interest rates she can afford.

Such is the pressure on these companies, the central bank has eased short-term borrowing costs and is preparing to go further with a cut in the overall interest rate.

Ownership, however, is just one of Beijing’s headaches. The economic recovery is faltering and inflation is rising, as is the case in many other parts of the world.

The leadership of the Communist Party has also embarked on a battle for control of industries which have succeeded in securing some autonomy. Xi Jinping, President of China, is particularly concerned that high-tech companies have drifted away from state control.

It irritates Chinese executives that Naspers, a Cape Town-based technology investor, injected just $ 32 million, in 2001, into an obscure internet company that went on to develop the popular messaging and payment service WeChat. Internet services provided by this company, Tencent, are now used by hundreds of millions of Chinese people, and Naspers’ shares are worth more than $ 200 billion.

Last year, Beijing blocked the $ 37 billion New York IPO of Ant Group’s affiliate Alibaba, and this year began accusing tech-owner billionaires of ignoring consumer rights. and data privacy, fueling excess debt and also fostering economic inequalities.

More than $ 1 billion has been cut off from Chinese companies, but that has failed to deter Xi.

According to government sources who spoke to the Financial Times, Beijing is preparing to force tech start-ups to raise funds in China, restricting the main channels used to attract international capital.

A blacklist of new companies in sensitive industries has been established to prevent them from using variable interest entities (VIEs) to manage their activities in China. VIEs are a legal structure used for decades by Chinese tech groups, including Alibaba and Tencent, to bypass restrictions on foreign investment and raise billions of dollars from international investors.

Diana Choyleva, a renowned China observer and director of independent consultancy firm Enodo Economics, said: Investment choice for domestic investors. The new Beijing Stock Exchange has just opened its doors to serve innovation-driven small and medium enterprises.

Carpool group Didi Chuxing announced last week that it would be pulling off the New York Stock Exchange.

Choyleva said the move was not so much to restrict foreign ownership of shares of Chinese companies as to have them bought through national stock exchanges under the watchful eye of Chinese financial regulators.

“It is not clear whether China also prohibits foreign investors from purchasing these assets in domestic markets. I think it is much more about restricting and eliminating the way of financing VIEs.