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The real question about China for investors

Rhodium Group Director Logan Wright writes on Beijing policymaking and the Evergrande dilemma for the Financial Times

China’s crackdowns against the property sector and its technology giants have jolted financial markets, sparking a debate about whether or not China is still “investable”. Longer-term bullish investors argue that Beijing’s commitments to economic growth and market liberalisation remain unchanged. They maintain recent actions such as tougher rules on property developer debt loads are efforts to reduce froth in the sector. Necessary adjustments in credit risk pricing will improve the functioning of China’s financial markets over time. In contrast, bearish investors argue that under Xi Jinping China’s fundamental political objectives have changed and maintaining growth and liberalising capital markets are now less important to the country’s leadership than goals related to “common prosperity”. They claim this summer’s campaigns, including the attacks on technology firms and education and tutoring businesses, imply that China is increasingly unsafe for investors. As interesting as this debate may be, it is the wrong one. The most important question now confronting markets concerns Beijing’s policymaking process, rather than political objectives — the means rather than the ends.

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