Caixin
Nov 09, 2018 04:27 AM
FINANCE

Saving Private Companies Is Riddled With Risks

Although regulators have repeatedly said that state-backed bailouts should be given only to companies that have “good development prospects,” the program is in danger of being used to prop up companies facing challenges that threaten the businesses’ survival. Photo: VCG
Although regulators have repeatedly said that state-backed bailouts should be given only to companies that have “good development prospects,” the program is in danger of being used to prop up companies facing challenges that threaten the businesses’ survival. Photo: VCG

The road to hell is paved with good intentions, the old proverb goes, and China’s latest initiative to encourage state-backed funds to help cash-strapped private listed companies is another example of how government policies can have unintended consequences.

These funds, many of which are being coordinated by local governments, are part of a series of measures authorized by the central government over the past month to bolster confidence in a stock market battered by the pledged shares crisis and to help private companies struggling to raise money.

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