Can Xi Jinping Defuse China’s Debt Bomb?

For the past couple of years, Chinese companies roamed the world in an unprecedented $343 billion cross-border takeover spree. Among the splashiest deals: Dalian Wanda Group, whose founder, Wang Jianlin, is China’s second-richest executive, bought Hollywood production and finance company Legendary Entertainment for $3.5 billion in 2016. Anbang Insurance Group bought the Waldorf Astoria. Fosun International Ltd. purchased Club Méditerranée SA and Cirque du Soleil. But as the binge seemed ready to go on, China’s banking regulator in June ordered lenders to scrutinize their exposure to four high-­flying private conglomerates that have announced $75 ­billion-plus in deals at home and abroad since the start of 2016: Dalian Wanda, Anbang, Fosun, and aviation and shipping giant HNA Group Co. Several major Chinese banks that helped fund HNA’s global acquisitions have stopped issuing new loans to the company, according to Bloomberg News. Authorities have also asked Anbang to sell its overseas assets and repatriate the funds, people familiar with the matter tell Bloomberg News. The company says that it “at present has no plans to sell” its foreign holdings.

Chinese executives were riding an historic credit expansion that the country’s financial authorities turned on after the global financial crisis—and never really turned off. Overall government, household, and corporate debt clocks in at more than $28.8 trillion, or 258 percent of gross domestic product. The biggest share, some $17 trillion, is concentrated on corporate balance sheets, particularly those of lumbering state-owned enterprises producing everything from steel to coal, construction companies, and property developers.