Three Dongbei Monty

Dongbei Steel defaulted again.
Sina: 东北特钢再爆债券违约 存续债券前景不乐观
DM: China's Dongbei Special Steel in new default as debt note matures
Unlisted Dongbei Special Steel Group Co Ltd, which defaulted on several bonds earlier in 2016, has defaulted on a private placement note which matured Monday, it said on Tuesday.

The ever defaulting zombie company is the latest Chinese business model out of Dongbei, third in its line. The first model was actual economic reform.

Al Jazeera: China's Dongbei model goes national
The Chinese government's programme of privatisations accompanied by mass layoffs began a decade ago in northeast China's little-visited Dongbei region.

...The Dongbei privatisation wave began in Liaoning after a 1997 visit from former premier Zhu Rongji. A bastion of state ownership, Liaoning's capital city Shenyang became famous as the birthplace of thousands of red capitalists - former government officials turned factory owners.

...The national rollout of the Dongbei model of SOE reform was put on hold amid worries of industrial collapse when the 2008 global financial crisis hit China.

Now that stability - if not necessarily economic growth - has returned, China seems ready to roll it out to the rest of the country in 2016. Privatisations are at the top of the agenda.
The Dongbei region is in the middle of depression now: China's Hidden Depression. The second Dongbei model is the use of massive debt, zombie companies and relying on real estate investment to prop up the economy. The depression underway in the northeast is a model for what could happen in other parts of China should the economy continue to weaken.

Finally there's the third Dongbei model for China, mentioned above, the zombie company that never dies.

The Australian: China’s zombie firms stay alive as efficiency takes a back seat
When China let Dongbei Special Steel Group default on a bond payment earlier this year, it was supposed to mark a new determination to allow long-coddled state industries to suffer the consequences of their bad decisions.

Three months later, the result has been … nothing. The ailing steel mill has missed five more payments on its $US6 billion ($7.9bn) debt, but has yet to formally file for the equivalent of bankruptcy protection, close unproductive units or start a restructuring of its operations.

In more-mature economies, defaults usually usher in wrenching change, including boardroom purges and asset sales. But China’s nascent efficiency drive already has been forced to take a back seat to short-term concerns about growth and employment.

As a result, China’s twin problems of overcapacity and souring debts at state-run companies are likely to drag on for years, holding back growth and keeping the country awash in unwanted goods.

“They will find ways to smooth it out over time,” said Bernhard Kotanko, a partner at consultancy Oliver Wyman. “We’re talking a minimum 10 years.”
WSJ: 中国“僵尸企业”违约后为何依然不倒?

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