Shaking up China's state-owned enterprises: Painful but necessary

A spate of defaults has rattled the debt market but there are good reasons not to bail out these troubled state-owned enterprises as Beijing presses ahead with economic reforms.

In the bracing new environment, it looks like the Chinese government has neither the ability nor the appetite to save all struggling SOEs. PHOTO: REUTERS
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Zhang Guoqing barely had time to settle into his new job as Communist Party secretary of China's Liaoning province in September when he was confronted with his first big test - to bail out or not bail out the cash-strapped Huachen Automotive Group.

Huachen, a state-owned enterprise (SOE), not only makes locally branded vehicles but is also involved in joint ventures with Germany's BMW and France's Renault. It was also in deep financial trouble, with a one-billion yuan (S$204.3 million) bond due on Oct 23.

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