China Evergrande Tells A Story That Beijing Prefers To Hide

China Evergrande Tells A Story That Beijing Prefers To Hide

The relative calm in markets after China Evergrande Group missed payments on investment funds suggests Beijing has, so far, avoided a "Lehman moment." That could always change, of course. But investors appear to be giving President Xi Jinping's government the benefit of the doubt. The bet is that Chinese officials will keep Evergrande from crashing the global economy the way the collapse of Lehman Brothers did in September 2008. There's another mistake Beijing may be making—one with parallels dating back to 1998. A decade before Lehman failed, down to the month, the Long-Term Capital Management collapsed. The Connecticut-based hedge fund founded by John Meriwether was caught badly positioned when Russia's default slammed global debt markets. And in some ways, the firm's collapse was thought to threaten several asset classes. The lessons from the LTCM debacle are the real ones China needs to internalize as 2022 approaches. First, a quick reminder of how the 1998 to 2008 period unfolded in the U. S. LTCM's blowup led to one of modern history's most dramatic bailout efforts. At the time, then-Federal Reserve Chairman Alan Greenspan and his team were convinced letting that single fund fail would tank global markets. The New York Fed,