Collapse XML to elements in Visual Studio Code

Ctrl+K, Ctrl+Num to fold level Num, where Num = 0-9; Ctrl+K, Ctrl+J to unfold all (palette shows you the shortcuts)

This is currently not possible but we plan to provide this feature in the future. You can suggest new features like this from our User Voice page. You can find your suggestion there.

Update for our VS Code 1.0 release:

Code folding has been implemented now!

XML node folding is available as part of XML, the extension built by Red Hat for VS Code.