![](https://i.imgur.com/CLvY2jA.png")
10-01-2022, 11:21 AM
In unfettered capitalism, what a company does its its own affairs. What bond investors choose to do is their own money and freedom ...and govts should be hands off. And let willing lenders and borrowers have liberty to do as they wish.if they lose money its their own business.
I want to explain why above is wrong and risky.
After studying many companies the way some of them operate pose a real risks to stability.
There are many careless lenders and companies can borrow to grow. Evergrande did that and employs hundreds of thousands of employees, thousands of sub contractors and millions of customers.
AirAsia had 20,000 employees in Malaysia. When it faced problem with debt, it would blatantly say it may need govt to support it financially otherwise these jobs are lost.
For Evergrande credit has to be given to China govt for establishing the 3 red lines to force a clean up property sector that can not endanger its economy but has global repercussions. Look at what the lack of regulation in US ...the pain it caused in Great Financial Crisis when highly indebted companies fail.
Seeing what has happened in other countries, and the prevalence of financial engineering used by corporations that may result in systemic risks, a monitoring and enforcement framework should be in place
1. Define metrics to identify companies that are "too big to fail". It should categorised by systemic and social impact.
2. Active monitoring of such companies financial metrics such as debt to equity etc. Establish a risk evaluation criteria.
3. Establish enforcement actions. The China is a good one when the property company reached certain debt to equity levels they are stopped from borrowing until they bring this down. They would have done better had if they had the red lines draw before so many companies already cross it.
I would like to see our govt being proactive knowing serious problems can emerge.
I want to explain why above is wrong and risky.
After studying many companies the way some of them operate pose a real risks to stability.
There are many careless lenders and companies can borrow to grow. Evergrande did that and employs hundreds of thousands of employees, thousands of sub contractors and millions of customers.
AirAsia had 20,000 employees in Malaysia. When it faced problem with debt, it would blatantly say it may need govt to support it financially otherwise these jobs are lost.
For Evergrande credit has to be given to China govt for establishing the 3 red lines to force a clean up property sector that can not endanger its economy but has global repercussions. Look at what the lack of regulation in US ...the pain it caused in Great Financial Crisis when highly indebted companies fail.
Seeing what has happened in other countries, and the prevalence of financial engineering used by corporations that may result in systemic risks, a monitoring and enforcement framework should be in place
1. Define metrics to identify companies that are "too big to fail". It should categorised by systemic and social impact.
2. Active monitoring of such companies financial metrics such as debt to equity etc. Establish a risk evaluation criteria.
3. Establish enforcement actions. The China is a good one when the property company reached certain debt to equity levels they are stopped from borrowing until they bring this down. They would have done better had if they had the red lines draw before so many companies already cross it.
I would like to see our govt being proactive knowing serious problems can emerge.
I, being poor, have only my dreams; I have spread my dreams under your feet; Tread softly because you tread on my dreams.
