Michael Schuman, Columnist

Why HNA Needs to Fail

Letting the conglomerate go bust would send the right signal.

February 11, 2018 at 11:52 PM UTC

Michael Schuman is a nonresident senior fellow at the Atlantic Council's Global China Hub and the author of "Superpower Interrupted: The Chinese History of the World" and "The Miracle: The Epic Story of Asia's Quest for Wealth."

Not good.
Photographer: Giulia Marchi/Bloomberg

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The latest news leaked out of China’s troubled HNA Group Co. is not good. Management has asked its employees to hand their paychecks over, with promises of big returns down the road. It is a pretty safe assumption that any company willing to try such a scheme is tottering on the edge of the financial abyss.

HNA’s woes present China’s leadership with a serious conundrum. The airline company has been one of the country’s highest-profile global dealmakers, investing in everything from Hilton Worldwide Holdings Inc. to Deutsche Bank AG. Not only would its unraveling set back government efforts to foster global champions, it would also deal a blow to the balance sheets of China’s banks and to the local economy of the underdeveloped province of Hainan, where HNA is based.