y Gabriel Wildau and Carrie Ho
WEIFANG, China (Reuters) - The Chinese official was adamant the city of Weifang would keep its rayon factory open, noting that local authorities had just stepped in to help the plant's owner repay $60 million in commercial paper.
The bailout averted what would have been China's first ever bond default and was good news for domestic bond investors, who were reassured that in China even mid-sized state-owned firms can count on "too-big-to-fail" treatment. monkey see, monkey do LOL
But for the long term, the opaque, politically driven rescue of Shandong Helon Co bodes ill for a country that must rely heavily on small, private-sector firms for future growth, as investments in infrastructure and basic industry yield diminishing returns.
Private firms, already crowded out of funding markets, will struggle even more to get credit after the bailout sent a clear message to investors that state companies are the safest bet.
"We strongly support the company," said the Weifang official, who gave only his surname Wei, as he discussed the Helon case over a lunch of chicken's feet soup, sweet green radishes and copious amounts of
http://finance.yahoo.com/news/insight-china-pays-high-price-160506904.html?l=1
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