China Needs Its Own Lehman Moment — Now
Enough with the pretend and extend. Beijing’s failure to cleanse its toxic debt pile is hampering the banking system and the nation’s economic recovery.
A weakening economy.
Photographer: Qilai Shen/BloombergChina’s financial system seems on the brink of collapse. Country Garden Holdings Co., once its biggest real estate developer with over 3,000 projects nationwide, is slipping into a default. One of the nation’s largest private wealth managers has been missing payments to investors. Meanwhile, distressed signals from regional governments, which rely heavily on land sales for fiscal income, keep on bubbling up.
By Western standards, these events would almost inevitably lead to a financial meltdown. The 2008 subprime mortgage crisis alone brought down Lehman Brothers Holdings Inc., one of the most revered lenders on Wall Street. This year, the Federal Reserve’s rapid rate hikes prompted a slew of regional bank failures. Even now, investors are worried about bank loans made to commercial real estate projects, hit hard by white-collar workers’ reluctance to return to the office.