Barely a day has passed this month without news of another Chinese company on the brink of collapse. There are solar cell makers missing interest payments on bonds, steel mills defaulting on bank loans and property developers going bust.
Anyone hearing this steady drumbeat of disaster could be forgiven for thinking that China’s star is fading, and fading fast.
It is certainly true that Chinese companies face serious challenges after a surge in their debt levels over the past five years. Coming down from their credit high was always going to be painful.
But some of the sensationalist shorthand for the adjustment now under way – “China’s Lehman moment”, “China’s Bear Stearns moment”, the collapse of “China’s giant Ponzi scheme” – obfuscates more than it illuminates.
Business is getting much tougher for Chinese companies from banks to property developers, but it is facile to think that they are headed for a replay of the 2008 financial crisis.
When encountering wildly bullish or deeply bearish views about China it is worth pausing for a moment to remember the country’s most defining feature: its enormous size. This makes it fertile ground for what psychologists call “confirmation bias”.
Want an example to show that the Chinese property market is in danger? Look no further than Zhejiang Xingrun Real Estate, a developer in a small eastern town that cannot repay Rmb3.5bn ($566m) of debt. Or would you prefer to make the case that everything is just fine? Then point to Shanghai, where sales of new homes jumped 46 per cent by area last week, nearing a three-month high.
Of course, the scale of China’s economy should not stop analysts, investors and journalists making useful generalisations, but any conclusions drawn from a handful of anecdotes should throw up red flags.
Taking a broader look at China’s default scares, three observations stand out.
First, Chinese corporate debt has soared over the past five years. The debt of non-financial companies rose from about 85 per cent of gross domestic product in 2008 to closer to 120 per cent today. This is a very steep rise in a short time – something that has been a precursor to financial crises in other countries – and it puts Chinese companies at the high end of indebtedness among emerging markets.
Second, China’s government is not blind to the dangers. The immediate trigger for the current corporate troubles was policy action.
When the central bank engineered a cash crunch last June and then allowed money market rates to drift higher in the second half of last year, it sent a message to banks about being more careful with their lending, and to companies about being less reliant on cheap credit.
By allowing Chaori Solar to miss an interest payment on a bond this month – the first true default in the modern era of China’s bond market – regulators also sent a message to investors that they cannot count on bailouts. The hope is that this will force investors to assess risks more carefully before throwing their money at undeserving companies.
Third, there is reason to be cautiously optimistic that China’s deleveraging will result in a slowdown, not a collapse. For better and for worse, the Chinese government still controls the economy’s big levers. Interest rates, the exchange rate and bank lending remain in Beijing’s hands to a significant degree – certainly far more than in any developed economy.
State control is part of what landed China in this predicament: too much cheap credit flowed to less-efficient government-owned companies.
But state control also has advantages when trying to get out of the mess. Just as it kick-started the deleveraging process last year, China’s central bank has relaxed its chokehold over the past month by easing monetary conditions. The seven-day bond repurchase rate – a gauge of short-term liquidity – has fallen 220 basis points from the start of this year to 2.9 per cent. This does not mean deleveraging has come to an end, but it is a sweetener to help companies through a painful period.
In addition, Beijing has been selective in introducing the concept of moral hazard to investors. It has let private companies fail, while standing behind government-backed companies. That approach would be highly worrisome if continued for too long – eventually, China has to allow ailing state companies to fail. But letting the air out gradually is preferable to shock therapy.
So much, then, for China’s Lehman moment. The country’s corporate woes look more like a slow, managed wave of deleveraging than a sudden, unwanted financial tsunami.
Simon Rabinovitch is the Financial Times’ Shanghai correspondent
然而，针对眼下的调整局面，一些耸人听闻的简称——“中国的雷曼时刻”(China’s Lehman moment)、“中国的贝尔斯登时刻”(China’s Bear Stearns moment)、“中国庞氏大骗局”(China’s giant Ponzi scheme)的破产——所造成的认知混乱，要多于它们对真相的阐明。
想举例说明中国地产市场处于危险之中？只消看看浙江兴润置业(Zhejiang Xingrun Real Estate)的例子即可。这家位于中国东部小城市的开发商，无力偿还35亿元人民币（合5.66亿美元）的债务。或者，你更愿意举例说明一切安好？那么来看看上海，上周该市的新房销售面积增加了46%，逼近3个月高点。