Evergrande declared bankruptcy seeking Chapter 15 protection on USD 31.7BN of obligations to keep its creditor restructuring plans on track.

Is this China's Lehman Moment? The answer may depend on what Lehman means to you. Bob Ivry, now Forbes Executive Editor for enterprise, snagged this quote from me in 2011—

Working at Moody's Investors Service and Hong Kong's Futures Exchange in the 1990s, I knew even then that America's fourth-largest investment bank was carrying staggering, unsustainable, sometimes illegal, levels of leverage. So, in this most basic sense, yes. Shenzhen-based China Evergrande Group (3333.HK) is a bit like Lehman: a private, working-capital intensive company buoyed by portfolio size and name recognition, that lived beyond its means for years. They each collapsed in September, 2008 and 2021, a neat coincidence.

But Lehman existed to break rules. Post-deregulation, the U.S. had built up an enviable, reasonably well-functioning system to fund economic growth using calibrated risk and leverage in off-balance sheet financings. Lehman, the cowboy, was the exception...until the rest of the market sabotaged itself and regulators decided to turn a blind eye.

Whereas it is probable that Evergrande had to break rules now and then to exist. China's policymakers had long recognized its banking system's limitations for the massive funding requirements to keep China growing at scale. They set out the 12th Five-Year Plan (2011-2015) to build new financial system infrastructure, including a copycat securitization market that would legitimize and regulate China's risk and heretofore unregulated shadow banks.