Can China contain Evergrande’s collapse?

The Chinese Communist party appears set to kill off its largest economic zombie, while gambling that it can control the fallout. Evergrande, the world’s most indebted developer, first defaulted almost two years ago, as China’s property bubble began to burst. It has since been able to stagger on from one crisis to another, while struggling to restructure its mountain of debt and sell its assets. Now even the CCP seems to have decided this is untenable. The problem for the party is that Evergrande is not the only occupant of China’s economic valley of the living dead, and the impact of its collapse may be impossible to control.

The signs of a final reckoning have been growing over recent days. On Monday, Hengda Real Estate, Evergrande’s main unit in mainland China, defaulted on repayment of a further $547 million of loans and said in a statement that plans to restructure its debts had ran into trouble because it was being investigated by the authorities.