China’s Biggest ‘Bad Bank’ Tests Beijing’s Resolve on Financial Reform

Chinese regulators say they want to clean up the country’s financial system, but a state-owned conglomerate may ultimately get in the way.

By Alexandra Stevenson, Keith Bradsher and Cao Li

HONG KONG — BlackRock gave it money. So did Goldman Sachs.

Foreign investors had good reason to trust Huarong, the sprawling Chinese financial conglomerate. Even as its executives showed a perilous appetite for risky borrowing and lending, the investors believed they could depend on Beijing to bail out the state-owned company if things ever got too dicey. That’s what China had always done.

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