Highly Indebted Chinese Companies Pose Challenge for Beijing

WASHINGTON - In the latest sign that corporate debt levels in China pose a threat to the broader economy, Chinese regulators on Friday were forced to halt trading in bonds issued by Evergrande, the country’s second-largest property developer. Concerns that the company will be unable to continue making payments on its obligations prompted a huge sell-off by investors, overwhelming exchanges.

The rush to unload bonds issued by the company — some were selling for as little as 26% of their face value — came after a report from Bloomberg that said two major trust companies that have made large loans to Evergrande had demanded immediate repayment. The crisis at Evergrande comes just days after another major Chinese firm, China Huarong Asset Management, released a long-delayed earnings report showing it had lost $15.9 billion last year and that its debt-to-equity ratio at one point totaled an eye-popping 1,333%. State-owned financial firms engineered a bailout of Huarong late last month to avoid a collapse that could have been catastrophic for the economy. However, there has been no indication of a similar soft landing for Evergrande, which has been selling off assets in a rush to raise the cash needed to satisfy lenders.