Teetering Shenzhen property conglomerate China Evergrande is the Chinese economy in miniature. Both have operated for decades on the principle that it was worth borrowing to build, in Evergrande’s case mostly housing, in China’s case not just apartments, but roads, rail, airports and other infrastructure.
Evergrande’s business has run out of credit, in large part due to policy shifts by the Chinese government. Investors have watched in horror as its bonds, and those of other wobbly property developers, collapsed. China’s economic model has also run out of road, and the process of putting it on a new track is likely to bring more Evergrande-like mistakes.