Let the West worry about so-called black swans, rare and unexpected events that can upset financial markets. China is more concerned about “gray rhinos” — large and visible problems in the economy that are ignored until they start moving fast.
The rhinos are a herd of Chinese tycoons who have used a combination of political connections and raw ambition to create sprawling global conglomerates. Companies like Anbang Insurance Group, Fosun International, HNA Group and Dalian Wanda Group have feasted on cheap debt provided by state banks, spending lavishly to build their empires.
Such players are now so big, so complex, so indebted and so enmeshed in the economy that the Chinese government is abruptly bringing them to heel. President Xi Jinping recently warned that financial stability is crucial to national security, while the official newspaper of the Communist Party pointed to the dangers of a “gray rhinoceros,” without naming specific companies.
Chinese regulators have become increasingly concerned that some of the biggest conglomerates have borrowed so much that they could pose risks to the financial system. Banking officials are ramping up scrutiny of companies’ balance sheets.