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this post was submitted on 12 Mar 2024
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It's actually quite funny how people foresaw the downfall of the Chinese economy following Evergrande, and it just kinda carried on as normal because the Chinese govt refused to bail them out.
No doubt some people are gonna get burned by that policy too, but they made the right choice by not rewarding a company that clearly had significant financial management issues.
Meanwhile here in italy when a major company fails and goes bankrupt because of shitty management, corruption and greed, we first "save" it with public funds, then sell it to someone else to profit off of it
A massive corporation going out of business sucks in the short term: people lose their jobs, among other financial woes. But if you keep bailing out failing corporations, you harm your economy in the long run because you're keeping a company artificially on life support using budget funds. The company will continue to fail and lose money, setting your country back years in terms of productivity and innovation, and your economy will fold inwards.
Not only that company but any other one is going to be incentivized to be irresponsible with their accounting and financial practices. What's going to happen if Google or Microsoft broke? Are they going to be rescued too?
Property developers in China, unlike banks in the US, are not the backstop of the economy. They are not too big to fall: it's just that their distressed assets need to be managed to minimize losses to their customers.
General Motors isn't the backstop of the economy and they were rescued too.