Yawen joined Reuters Breakingviews in Hong Kong in September 2020. Previously, she spent four years covering China’s economy for Reuters in Beijing, crunching economic data, interviewing high-level officials, and travelling to far-flung provinces to visit factory floors and talk to local shopkeepers. Before that, she spent nearly three years in Santiago, Chile, where she built a trade news website reporting on the produce industry – and developed Spanish as a third language alongside Mandarin Chinese and English.
Beijing managed the market impact when it allowed quasi-state entity HNA to slide into bankruptcy. It will face more complex problems if privately-run Evergrande folds. The longer authorities wait to signal support, the more pages it will need to add to its corporate disaster playbook.
Variable interest entities used to skirt overseas investment restrictions have existed in a regulatory gray area. Beijing’s ban on foreign funds in education suggests those days are ending. Unwinding the structures will be messy, but also could teach other industries a lesson.
Forced to cut interest-bearing debt, Chinese real estate companies like Evergrande borrowed $556 bln from their suppliers last year. Now they are struggling to repay, prompting a crackdown. Offloading land assets could raise cash quickly, but developers have cause to resist.