China must fight its addiction to debt

Private and state-owned companies, local administrations and private households have accumulated huge mountains of debt. The government knows the risks and wants to reduce them. Your problem: If it becomes serious, it can cause severe distress.

In many places in China, farming villages soon had to give way to high-rise apartment buildings like this one. This has so far paid off for local administrations, property developers and new owners. But now the government wants white-collar exaggerations.

Kelay Shane/Bloomberg

When the Evergrande management felt a few months ago that it was becoming increasingly difficult to obtain new loans from Chinese banks, they quickly developed a new model for securing liquidity: management forced employees, customers and suppliers to borrow and promised them attractive returns of up to 25 percent. Ding Yumei, wife of Evergrande founder Xu Jian, set a good example by investing $3 million. Instead of borrowing money from banks, Evergrande now borrowed money from well-meaning employees and customers. Given the potential bankruptcy of the real estate developer, they are now threatened with huge losses.

Nancy Stevens

“Tv expert. Hardcore creator. Extreme music fan. Lifelong twitter geek. Certified travel enthusiast. Baconaholic. Pop culture nerd. Reader. Freelance student.”