Townsville Bulletin

Xi’s debt bomb set to blow

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BEIJING: Chinese President Xi Jinping is facing the most serious test of his approach to capitalism, as Beijing is forced to decide whether it should allow a corporate giant burdened with hundreds of billions in debt to go bankrupt.

In what has been described as China’s Lehman Brothers crisis, the Communist Party was considerin­g whether to provide a bailout to Evergrande, a property multinatio­nal that has risen to become one of China’s biggest companies. It borrowed heavily to finance its rapid expansion and now has debts of more than $400bn. The latest round of payments on those debts was said to be due on Tuesday.

Should Evergrande be allowed to fail, experts warned that it could be the tip of an iceberg that would affect China’s entire economy. The shockwaves of Evergrande’s failure would also be felt across the financial world.

Evergrande, meanwhile, has halted work on the majority of its housing projects.

The company, founded in 1996, rode the country’s property boom to become the 122nd largest group in the world by revenue. Its founder, Xu Jiayin, was China’s richest person.

The crisis comes as Mr Xi has appealed to rank-and-file Chinese with policies to make housing more affordable and curb what he has described as excessive wealth among the country’s elite.

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