Foreigners theorise endlessly about the motives of the Chinese authorities. Occasional blunt action replaces hypotheses with clear messages. On Friday the government took control of troubled Anbang Insurance, once known for splashy deals abroad and assets of more than $123bn. The group’s former leader, Wu Xiaohui, will be tried for economic crimes. Read this as a warning: private businesses enjoy no a-priori state consent.
Similarly, Guangdong International Trust & Investment Corporation, with $7bn in assets, went bankrupt in 1999. Beijing was signalling that no one should expect it to bail out big loans to state-owned groups. The party proclaimed it wanted China’s companies to “go out” in the same year. Anbang, Dalian Wanda, Fosun, and HNA took that principle too far.
The difference between Gitic and Anbang is that the latter has funded itself with wealth management products — largely loans from domestic savers. Had Anbang started defaulting on them, the already precarious stability of that risky funding market might have been threatened. It would have also hurt the individuals from which the group borrowed. That makes an orderly wind-down more desirable than the heavy writedowns foreign investors took on their loans to Gitic.