China’s debt milestone as the first company defaults

In most countries a corporate debt default would barely register: after all, companies often go bust. But in China they have so far not been allowed to collapse. So last week’s news that struggling solar-equipment maker Shanghai Chaori had been unable to make a full interest payment, and was therefore in default, is a real milestone.

China’s corporate debt has grown to around $12 trillion. Its government cannot feasibly stand behind every loan. Apart from anything else, a belief the state will step in if things go wrong encourages companies to take unnecessary risks. Since taking charge of China a [...]

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