Look to Japan for lessons on Evergrande


Evergrande Real Estate Group updates

Is the saga of Evergrande akin to the collapse of Lehman Brothers in 2008? Or is the rescue of AIG that year a better parallel? Or the 1998 bailout of Long-term Capital Management? 

That is a question being raised by investors as China’s second largest property group struggles under the weight of more than $300bn of debt (including $20bn in dollar-denominated bonds) and a cooling domestic property market.

But for my money there is another historical parallel to ponder: Hokkaido Takushoku, the Japanese regional bank, which imploded 24 years ago, when more than a tenth of its $75bn loan portfolio turned bad.

At first glance, that comparison might seem odd. Evergrande is a property developer not a lender. But what links them is a question that stalked Japan in 1997 and now hangs over Chinese finance: namely,…

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