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William Pesek

China's Detour on Highway to Default

The near-default of a previously obscure road-builder in China illustrates how debt woes threaten to strangle the Chinese economy.
A debt crackdown in name only.
A debt crackdown in name only.

Odd as it may sound, the fact that Huatong Road & Bridge Group dodged a default on July 23 is bad news.

Until Wednesday, markets had been buzzing about the possibility the Shanxi-based builder might become the second mainland company in four months to renege on a bond payment. Then, Huatong beat the odds, repaying all principal and interest on a $65 million bond. How? Some aggressive fundraising, along with a little help from local government bodies. According to press reports, municipal officials intervened to prevent the company's collapse.