China’s grey rhino hunt should extend beyond its tycoons

William Pesek says regulators realise the country is setting itself up for a reckoning similar to that of Korea in 1997, as debt-ridden firms expand abroad. But state-held giants, too, are concentrating financial risks at the top

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There may indeed be valid reasons to curb China Inc. Its dizzying overseas buying binge amounted to nearly US$350 billion in the past few years. Illustration: Timothy McEvenue

Published: 2:36pm, 4 Aug 2017Updated: 6:28pm, 4 Aug 2017

China’s tycoons seem to be having a Russian oligarch moment, as Beijing suddenly decides they’ve grown too big, too unaccountable and too opaque for comfort. In the Chinese context, that’s code for Xi Jinping’s (習近平) government worrying that globally acquisitive conglomerates like Anbang Insurance, Dalian Wanda , Fosun , HNA and Zhejiang Luosen Neili are growing too big and too indebtedto fail. Hence the chatter about taming the “grey rhinos” – obvious, high-impact threats that can abruptly run away from officials.

The optics of the empire (the Communist Party) striking back at the business empires that a month ago were sources of national pride are odd for sure. What are the “Belt and Road” and the Asian Infrastructure Investment Bank if not parallel efforts to widen China’s global footprint, boost market share and export the mainland’s overcapacity problems?

Still, regulators are scrambling to clamp down on sprawling private enterprises using political connections to gorge on cheap state-bank debt and imperil a financial system that has become too top-heavy. In other words, Beijing is curtailing tycoons who may have become not too Russian, but too Korean.

Wang Jianlin, chairman of Dalian Wanda Group, and Sunac China Holdings’ Sun Hongbin arrive for a strategic cooperation signing ceremony in Beijing, on July 19. Photo: Reuters

China shifts gear from growth to debt cuts in race against rising tide of red ink

Economists always try to extrapolate where a crisis might be heading by looking to the past. Japan’s 1990s debt collapse certainly offers Beijing lessons. So does Wall Street’s 2008 crash, with eerie parallels to China’s shadow-banking risks today. The best corollary may be Asia’s 1997 reckoning, particularly in conglomerate-heavy South Korea.