China is a Minefield for International Creditors (Washington Examiner)
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The Chinese government is struggling to survive revenue shortfall when three-year-long pandemic mismanagements take a toll on its economy. There is simply no spare fund for a private company whose collapse is only a matter of time. Even if the government had the resources, an Evergrande rescue would encourage thousands of Evergrande-in-the-making to follow suit — that is, borrow to expand and default to be rescued.
These borrow-first-default-later attitudes are bad, but the drive underneath is uglier: The Chinese government might see those offshore debts as a threat to its own foreign reserves. Although China has the largest foreign reserves (approximately $3 trillion), over half of that is from foreign direct investments, which need to be paid out when the investments leave China, as many are doing already.
With its foreign reserves coffer shrinking due to the loss of export steam, offshore debt repayments would be a drain on China’s foreign reserves. That is why the Chinese government actively encourages firms to roll over their overseas debts and may even be quietly encouraging defaults.READ MORE
