Government-backed investors will recapitalize China Huarong Asset Management Co. after the bad-debt manager posted a record $15.9 billion loss, ending months of speculation over whether Beijing would deem the troubled financial giant too big to fail.
The rescue package unveiled on Wednesday, while thin on official details, suggests President Xi Jinping’s government is for now unwilling to allow a default by one of China’s most systemically important state-owned companies. It’s likely to boost short-term confidence in China’s $12 trillion credit market, even as it raises concerns about the longer-term dangers of a financial system where implicit government guarantees have enabled years of reckless borrowing.
