标签归档 武汉狼盟

Lynk & Co in the early launch of the three models (01/02/03) in addition to the design is more avant-garde, in fact, the essence of the shape positioning is very traditional (compact, sedan), even if it is bold, it is only in the sedan on the basis of the performance car 03 +. So this seemingly very leather brand, in fact, the pace is very stable.

As bystanders, after looking at its brand product line, most of us would think that it is time for Lynk & Co to pull out one, and preferably a sedan to complement its lineup. However, after entering 2020, Lynk & Co has once again skinned it and pulled out a compact and niche coupe.

Design is difficult to appreciate both elegant and vulgar

Over the years, coupe design has been rampant, from high-end to close to the people to old man music. This design, which should have been exclusive to cars, has appeared by mistake, largely due to the crooked head of the year. From another perspective, why people don’t like this style is mainly because the high visual center of gravity is matched with this oblique streamline slip, which can easily create a "hunchback feeling". This destroys the streamline aesthetics of the vehicle to a certain extent, and the essence, qi and spirit of the whole vehicle will become declining.

So that the design of this kind of design is often separated by a line, and the design skills are very exquisite. The design of Lynk & Co is definitely higher than that of those car companies that only outsource to Binfa design, so when you look at it from the side of the Lynk & Co 05 car, its hunchback is not obvious, and the whole is still very smooth.

For most people, at least the first time you see the Lynk & Co 05, you won’t have obvious disgust, but it’s also hard to fall in love with it all at once. That is to say, the 05 model is a classic example of "I like it very much, I don’t like it if I hate it". Since the birth of the Lynk & Co 05, it has been decided that it needs a Bole who can appreciate it. I don’t know what you think of this horse in front of the screen?

As for another point, although the front of the Lynk & Co 05 is a familiar layered design, the overall design language has clearly entered the "2.0 era". Like the front middle grid grille, daytime running lights, etc., there are obvious variants compared to the past, and the overall style has changed from round to sharp.

Although you can still recognize the car at a glance when you look at it from a distance, many changes in the details will make your brain tell you that "this is not the old Lynk".

Luxurious interior

And the entire interior of the 05 can be regarded as earth-shaking. If you get into the car, touch the fur that feels great, look at the imported aluminum trim like a mural, and there is a natural feeling at the intersection of the former two, then you will suddenly flash the word "advanced" in your mind at a certain moment. After all, the interior of the 05 is a level higher than previous models in terms of design and materials. This kind of car material also proves that Lynk & Co is trying to create a more advanced atmosphere than previous cars.

As an old car owner, I basically have nothing but praise for this interior, especially the new central control system, which not only has a clear screen and smooth picture, but also has quite complete functions. And the new fingerprint recognition, glove box password lock and other small functions are also very interesting and useful. Of course, this set of cars with good experience is largely due to the use of Qualcomm Snapdragon 820A chips (the standard level of Android phones around 2016). I used my own 03 central control system after shooting, as if I had returned from the Iphone 4 to the Nokia era. I don’t know when Lynk & Co officials will be able to consider replacing the cars of early users, even if it is at their own expense. I believe most people are willing.

Another point is that this time the Lynk & Co 05 has finally adjusted the driving mode selection to the front and rear push type, which is much more reasonable than the previous knob type + determined operation mode. Of course, it should also be pointed out inside the car that there is still a lot of room for improvement in the utilization rate of Lynk & Co’s storage space. Second, the manual mode of the Lynk & Co car series (the shift handle swings left and right to perform manual lift and drop gears), the high-end car with steering wheel shift paddles is fine. If it is a low-end car, it really has to pay a certain learning cost. Is this "bad" tradition really necessary to be preserved?

As for the rear space of the 05, I think the 32cm legroom can definitely meet the needs of most people. Secondly, the back-sliding indenter that everyone is worried about has also been specially treated for stealing air on the 05, and the wide and thick seats with good wrapping make it comfortable to sit up. However, due to the center of the four-wheel drive model, the middle position of the Lynk & Co 05 is not suitable for adults to ride for a long time.

In addition, it should be noted that a good sense of body does not mean a good look. Even if the front bucket chairs used by the entire Lynk & Co series are commendable in both appearance and practicality, the wide bucket chairs and the upwardly narrowed window line of the back door will create a sense of sight suppression in the rear row of the 05, and it will feel dark in front of you when closed (opening the panoramic canopy will be greatly improved). Of course, with the original rear privacy glass, you can also think that the back row of the Lynk & Co 05 has a strong sense of privacy.

Compared with the riding space, the back of the car often has a greater impact on the trunk space. From the data, it can be seen that the trunk of the Lynk & Co 05 is indeed slightly worse than the traditional shape (mainly due to the height of the trunk and the opening of the trunk off the ground). However, in terms of practicality, the 05 has been targeted for floor sinking. If you compare other models of the same design (such as the Changan CS85), you will see that the trunk space utilization rate is quite good.

Same powertrain.

The Lynk & Co 05’s powertrain can complete the overview in three words: "2.0T for T5", "Aisin 8AT", "50:50". It sounds familiar because everything is exactly the same as + except for the plastic cover above that doesn’t say "Performance" and the lack of a track mode on the driving mode.

Only from the objective data point of view, the 2.0T of 254 horses is just right; and from the subjective experience point of view, in the comfort mode, the front section of the throttle is still very linear, and occasionally there is a feeling of laziness, but after deeply stepping on the throttle, the acceleration of the middle and rear sections is very sufficient, and the turbine pressure will give you a feeling of continuous power.

If you want to be restless, the whole powertrain in sport mode will be much more aggressive, the throttle response will be timely and sensitive, and the willingness to step down deeply on the throttle will become more active. If you want extreme sports, then you may have to forgive me, because the split and extremely restless track mode does not appear in the 05 driving mode selection list.

Since it is mentioned, then I have to mention this set of Aisin 8AT, the shift rhythm may not be too crisp, but the victory is smooth. With its assistance, the whole 2.0T is very smooth. After all, this set of 2.0T + 8AT has been matched with high-end models on the Internet for many years, and it is transplanted to the CMA platform intact, which will not be difficult for Lynk & Co. With the group’s many years of cooperation experience with Aisin, making this high-quality powertrain is purely a routine operation.

In addition, after a long time of contact with a variety of models of Lynk & Co, I finally came to an unspoken rule that is not a secret. That is, the steering feel of Lynk & Co cars is often distinguished according to. From 1.5T, 2.0T low public rate, to 2.0T high, their steering feel is gradually increased from light to heavy. So if you love driving, then you will definitely prefer the steering feel of 03 + and 05. Although their feel is relatively light and flexible compared to similar models, they still belong to the category.

As for the Lynk & Co 05, I was a little surprised. Generally speaking, the models with the CMA architecture are relatively similar, with a strong sense of advanced and sufficient toughness. They are also very calm in the face of road shattering. Like the 01, 02, and 03 that are casually pulled out can overwhelm them in terms of comfort compared to competitors in the same price. However, Lynk & Co is a little too comfortable in the adjustment, which often causes the vehicle to roll more obviously when cornering (even the ordinary 03). Compared with previous models, the Lynk & Co 05 can still maintain a high level of comfort. There is also a roll, but it is obvious that the support when cornering is very good. It can filter the vibration of the road surface while transmitting a non-disturbing road feeling. The whole has a strong sense of firmness.

If the range of 0-100 is used to describe the change of the Lynk & Co car series from comfort to hardcore, then the previous 01, 02, and 03 may be around 60 points, which is obviously more comfortable, like + is 100 points, the road feeling is very clear, and the Lynk & Co 05 is just in the range of 80 points. In other words, the Lynk & Co 05 is the most balanced one in the current Lynk & Co car series.

It is also the most expensive Lynk & Co in terms of sound insulation.

The Lynk & Co 05 is currently the only Lynk & Co car equipped with double-glazing in the rear, so it has a good environmental sound insulation, and there is even a slight ear pressure when closed. And even if it is limited by the higher shape, there is no obvious wind noise during high-speed driving, and the sound insulation level of the whole car is compared with that of luxury brands, and it will never fall behind.

There were two main sources of noise. Firstly, the Eagle, a performance tire with a hard wall, would be more challenging, and the tire noise was still more obvious. Secondly, the ancestral T5, which had a strong grainy feel at medium and low speeds and was not very pleasant to the ear when transmitted to the carriage.

I became weirder and stronger

The comprehensive strength of the Lynk & Co 05 is beyond doubt. The complete powertrain, the rich configuration level, the top NVH and so on all mean that Lynk & Co really goes to great lengths to build a higher-end Lynk & Co. In the 18-220,000 range, it is difficult to find a model as unique and cost-effective as it. From a recommendation point of view, it is definitely worth buying.

The premise is that you can accept its unique appearance.

[Lingke 05 First Test Impression]

Outstanding advantages: perfect powertrain; high configuration level; easy to use; chassis for comfort and control, cost-effective.

Main shortcomings: general storage space and low universality of design.

>On December 7, new screenwriter Liu Xiaofeng revealed on Weibo that Wang Sicong’s "banana plan" owed him 800,000 yuan in script bonus.

>Liu Xiaofeng said that due to his family’s financial pressure, he once recorded a kneeling video for Banana Film CEO Wei Xiangdong, imploring him to convey his anxiety to Wang Sicong.

>Four days after the incident was exposed, Liu Xiaofeng toldEntertainment StudioNow that the other party doesn’t care about public opinion, he is also using legal means to defend himself.

>Liu Xiaofeng’s experience once again exposed the industry dilemma facing new Chinese screenwriters.

>He told his screenwriter friend that he hoped to be the last screenwriter in China to be defaulted on royalties, and his friend replied: Dream on, in your next life.

Uncashed 800,000

>Liu Xiaofeng used to work in the hotel industry. In late 2017, his script "Tower Cry" entered the stage of frequent meetings with partners. In order not to affect his job, he chose to quit his job as a full-time screenwriter.

>Non-academic, without any school, Liu Xiaofeng, who is fighting alone, is eager to find a company and become a contracted screenwriter.

>In the second half of 2018, he saw the first "Banana New Screenwriter Dream Realization Project" organized by Wang Sicong. After submission and interview, his script "Genius Screenwriter" finally won the third prize and became one of the six winners. According to the promise, the prize should be 800,000 yuan.

>Picture from Liu Xiaofeng Weibo

>Afterwards, Liu Xiaofeng and Banana Film signed a relevant contract agreement, and cooperated with the script copyright transfer according to the agreement. According to Liu Xiaofeng, from July to December 2019, Banana Film did not fulfill the contractual commitment to pay the bonus within the specified time after the copyright transfer. At that time, Banana Film CEO Wei Xiangdong explained that Wang Sicong was only a temporary financial problem, and would still pay the bonus to incubate the script and shoot the film when the funds were turned around.

>Until September 2020, Liu Xiaofeng was under great financial pressure due to family reasons, and asked Wei for a bonus again. The other party replied that Wang Sicong did not give him the money, and he could not manage it even if he was a part-time worker.

>According to Liu Xiaofeng’s understanding, several other award-winning screenwriters are well-connected in the circle and have basically chosen to terminate their contracts with Banana Pictures. However, he believes that the copyright of his script "Genius Screenwriter" has been owned by Banana Pictures for more than a year and a half, and he hopes to get his own bonus.

>Picture from Liu Xiaofeng Weibo

Two big pits in front of new screenwriters

>In his three years in the industry, Liu Xiaofeng has yet to make a single production. He has written about 10 original scripts, including "Genius Screenwriters", and sold a total of three original scripts, which has become his main source of income.

>As a new screenwriter, in addition to writing originals, he has also been exposed to some opportunities to write for other projects through his own connections and resources.Before entering the industry, friends told him to be prepared for unpaid royalties and difficult authorship – two common industry dilemmas faced by screenwriters.

The project is yellow, and the balance is gone.

>In the past two years, Liu Xiaofeng has participated in a number of online movies.

>There was a project that was about to start filming, but when the policy for online movies became stricter, the market tightened, and the project went bankrupt.

>This year, he wrote another online movie script, and the investment was also found. As a result, the producer told him to start making main theme movies, and the project was temporarily suspended.

>Compared to other jobs such as directors and actors, the screenwriter’s work all takes place before the start of the production. After the script is written, the project is not filmed. Of course, the screenwriter has the greatest loss.

>Liu Xiaofeng said that the current rules are basically divided into three payments to screenwriters. The first payment is a deposit, the second payment is paid after the first draft is published, and the third payment is paid after the boot is turned on. If the boot cannot be turned on, it means that 30% to 50% of the balance will not be received.

>The bigger problem is that China is a human society. If it is a job introduced by real-world friends, it is often paid after the work is done. Once the project is yellow, it may be equivalent to doing it in vain.

>"As a rookie screenwriter, the price is very low, especially at Wangda University. A better one will give you 8 to 100,000, and a closer one will be 3 to 50,000."

>After publicizing that the banana plan owed him 800,000 bonuses, a friend told Liu Xiaofeng that his outstanding payments over the years added up to almost 1.50 million.

>Liu Xiaofeng asked why the other party did not pursue the case, and his friend told him that because it was difficult to defend rights, it would take several years to file a lawsuit. It was possible that the producer had run away, or that the project had gone bad. If the project had gone bad, he would still be chasing the producer for money.

>"If you are serious with him, will you still get along in the future, and will you still mix in this circle? So although the other party did something wrong to me, I can’t say anything about him, and I have to be friendly with him on the surface."

The work is done, the signature is gone

>The big screenwriters assigned the work to the new screenwriters, and the new screenwriters were responsible for the main writing, but in the end, the big screenwriters were named. This was a common phenomenon in the screenwriting circle. Liu Xiaofeng, who had been in the industry for three years, did not want to accept such unspoken rules, but some good opportunities for big projects may have been lost like this.

>"Once, the filmmaker sent me something written by a big screenwriter for me to change. In the end, when it came to authorship rights, I could only ask me to be a literary editor, but I didn’t accept it. My screenwriter friend said that you have to have some backbone and can’t start this, otherwise it will be detrimental to your career development in the future.

>Now the filmmakers are very good at chatting, first tell you how good this project is, and then let me give my opinion. After chatting with me, I took all my ideas, started to talk about the price, and the price was also negotiated. Finally, I will say that because the first draft is a big screenwriter, you can’t be a screenwriter when you sign your name.

>I know that they are original, and I have no problem with them, but I have also revised them. I have also created them, and I am also a screenwriter. If I were just planning and editing, I would not be able to change them so meticulously.

>The other party said there is no way, or I will give you some money. I said it is not about money, what kind of work should be signed. "

Picture from Wang Hailin Weibo

>There are a large number of new writers in the industry who are facing these two dilemmas. They may be alone, but is there a better way to solve their dilemma?

>In addition to going it alone, signing a screenwriting company and working with a big screenwriter are two other mainstream options. In Liu Xiaofeng’s opinion, both have advantages and disadvantages, but he prefers to sign with a big screenwriter.

>"For example, I’m working alone now, and a company comes to me to talk about buying a script, and the cost they want to pay is the price I want to sell it. If I sign with the company, they have to give my company a commission, so some companies prefer to talk to a solo screenwriter.

>I prefer to follow the big screenwriter because there is a role of mentoring. Although the big screenwriter may take the job and our subordinates will do it, if we are lucky, we may be able to sign a co-writer, and now it is all celebrity effect. After our new screenwriter comes out, if there is a big screenwriter in front of us, they will immediately take a high look and be willing to chat with you. Maybe after working with the big screenwriter for a few years, you can slowly have an independent signature. "

　Why didn’t the "banana project" happen?

>It is precisely because the survival situation faced by new screenwriters is so difficult that every film festival venture capital and every new project endorsed by celebrities is like a dawn, a hope.

>Banana Pictures was born in August 2017. On September 27 of that year, the "Banana New Director’s Digging Project" was announced. It was the first time that Wang Sicong entered the public eye as the behind-the-scenes operator of the film company.

>A total of 812 directors signed up for the "Banana New Director Digging Project" and received 840 films. On April 26, 2018, the program held an awards ceremony, and 16 directors were announced on the spot.

>During the Shanghai Film Festival in 2018, the Banana Project held another press conference to announce the launch of the "New Screenwriter’s Dream Realization Project", with a total prize of 6.30 million RMB.

>Wang Sicong had a long-term plan at the time, and planned to use the method of "discovering new directors one year and discovering new screenwriters one year" to cultivate a group of top directors and screenwriters in six years.

>At the awards ceremony of the new director project, Wang Sicong once said proudly, "Others want to turn 200 million into 1 billion, but I already have 1 billion, so I can directly take out 200 million and see if I can do something for my favorite movie."

>Banana New Screenwriter Dream Project

>From the public information, after the first new director’s excavation plan, there was no news of any director’s salary claims. We can assume that the banana film industry was still not short of money at that time, and the banana film industry did not subjectively default on bonuses.

>But in 2019, due to the freezing of Wang Sicong’s own property and the absence of banana film industry, the first screenwriter’s land excavation plan ended up with the bonus that could not be honored.

>A well-intentioned plan couldn’t be carried out in the second year; a new film company started "underpaying" after three years of establishment, what was the problem?

First, there is a lack of professional talent.

>The reason why the "Banana Project" initially gained attention was one of Wang Sicong’s celebrity effect, and the other was that his arrogance was not bad for money.

>However, after the film and television industry experienced a meteoric rise around 2015 and a continuous influx of hot money, what it needs is not only funds, but also professionals with the ability to incubate projects.

>On September 27, 2017, at the launch of the "Banana Project" meeting with the public for the first time, Wang Sicong said that there are too many garbage movies in China, and Chinese directors have great problems. At that time, he expressed the hope that the film industry will be more professional. For example, some directors have multiple jobs on the set, and some directors have been shooting a scene for many years. They think that is obviously very unprofessional.

>Although he understood the truth, Wang Sicong himself was not a professional film talent, and his company did not recruit true core and first-line professionals.

>Banana Pictures has always promoted youth and innovation, and in a press release, Banana Pictures described its team as "a young team with an average age of only 26 years, an active personality, a pragmatic style and a strong professional style."

>Therefore, this is a company that unearths new directors and new writers, and then allows a group of newcomers with an average age of only 26 to develop projects.

>Banana Pictures’ publicly announced corporate positioning is to "consolidate the infrastructure of film and television talents and produce content products that young people like". The company’s image is "positive energy, youthful, anti-routine, personality, and interesting", but all this can easily be reduced to slogans. What a film production company really needs is a team that can develop projects, set up plates, and shoot on the ground.

>The film industry needs innovation, but experience is just as important. How can a group of inexperienced newcomers put a project to the ground? And the company also lacks Dinghai Shenzhen. Wei Xiangdong, the CEO of Banana Film, is a former host. He has participated in movies such as "Unexpected Love Time", "Mr. High Heels" and "Keep Silent".

Second, success or failure is all about money.

>The venture capital units of major film festivals are a valuable platform for many new directors and screenwriters, where they can meet the right investors and producers to help them bring their projects to fruition.

>The Directors Association’s "Green Onion Plan" relied on the resources of the Directors Association, and there would be many experienced directors and producers to help new directors implement the project.

>Compared with the longer-established film festival venture capital unit or the resource-rich "Green Onion Project", the "Banana Project" cannot prove its own subsequent incubation and development capabilities, so the high project bonus has become its greatest advantage.

>Liu Xiaofeng remembered that there were 3,170 screenwriters participating at that time. On the last day of the deadline, because many people submitted their contributions, the website of the "Banana Project" once crashed.

>Some of these new screenwriters regard Wang Sicong as a new hope, and perhaps some of them are motivated by money.

>In recent years, there have been a lot of plans to find new directors and screenwriters, and the industry is also discussing, do you really need so many plans? Is there really so much talent to find?

>From the perspective of the contestants, we believe that the "Banana Project" should fulfill its commitments; but from the perspective of the "Banana Project"’s own operation, in the absence of sufficient project development capabilities in the banana film industry, it is debatable whether it is necessary to spend high prices to find new people for six consecutive years, and whether the excavated projects are suitable for the company itself to develop.

>Many things can’t be done well with money. Back then, Panda Live occupied the market with high-priced signing popularity live streaming hosts, but was defeated because of insufficient follow-up operation capabilities. It also earned money by throwing money at the "banana plan". What needs to be consolidated is the follow-up development capabilities.

>The failure of the "Banana Project" was similar to the failure of Panda Live. As an investor, although Wang Sicong understood the importance of professionalism, he obviously needed to find the right path to it.

Picture Source Banana New Director Digging Project Weibo, Wang Sicong, Wei Xiangdong

At present, the most crucial thing is to stop the bleeding of Hengda, stop allowing its risks to accumulate and spread, and at the same time, we should preserve good evidence to lay a good foundation for future accountability through the rule of law.

Author | Li Wei

Source | Caixin

Li Wei

Professor of Economics, Cheung Kong Graduate School of Business

Director of the Case Study Center of Cheung Kong Graduate School of Business

Director of the Big Data Economics Research Center of Cheung Kong Graduate School of Business

Vice President of Asian Markets

On September 24, 2023, China Evergrande Group (referred to as Evergrande) issued an announcement saying that "in view of the ongoing investigation of Evergrande Real Estate Group Co., Ltd. (the main subsidiary of the company), the current situation of the group cannot meet the eligibility for the issuance of new notes".

Public information shows that Hengda is in a serious insolvent situation. At the end of 2021, the end of 2022 and the end of June 2023, the company’s insolvent gap is 473.10 billion yuan, 599.10 billion yuan and 644.20 billion yuan respectively.

Judging from this set of data, Evergrande has not "stopped the bleeding". What should be done for such a large real estate company that is in crisis and the situation is rapidly deteriorating?

Market-oriented solutions

The current situation of Evergrande is not optimistic. If the government does not intervene in this crisis and the market comes up with a solution, then there are only two outcomes. One is that Evergrande goes bankrupt, and the other is that market-oriented institutions acquire and integrate Evergrande without the help of the government.

Let’s look at the first outcome. Logically, this is the most likely outcome if Evergrande’s crisis continues to worsen. If Evergrande does go bankrupt, what consequences will we face?

In principle, companies, like people, no matter how big or small they are, will die one day without much fuss. However, the reality may be much more complex than we think, especially for large companies with a wide range of implications.

A classic example of this is the impact of the collapse of Lehman Brothers Holdings Inc. during the 2008 financial crisis.

In 2007, the pressure on financial marekts caused by falling house prices became increasingly obvious, and a series of Financial Institution Groups began to experience insolvent problems, but the overall situation was still under control.

After entering 2008, the situation took a sharp turn for the worse. Lehman, the fourth largest investment bank on Wall Street, began to thunder continuously, and the problem of insolvent gradually appeared. At that time, there was a huge disagreement in the whole society on whether the government should rescue Lehman.

In fact, the government also wanted to raise resources to rescue Lehman, because Lehman was one of the core nodes of the US financial network, but it was ultimately concerned about moral hazard (moral hazard refers to the fact that under the condition of asymmetric information, the responsible economic actors do not bear the full consequences of their actions. For example, Lehman took excessive risks in the course of its operation, making money for himself, and losing money can be required for government rescue based on its importance), and gave up the rescue.

The collapse of Lehman Brothers brought the financial crisis to a climax, causing the largest crisis in the US economy since the Great Depression.

The government’s abandonment of the Lehman bailout quickly escalated the financial crisis, but if Lehman is bailed out, it is likely to exacerbate moral hazard in the financial system in the future. As moral hazard builds, it will only be a matter of time before a larger financial crisis erupts.

The failure of Lehman’s self-rescue brought an unexpected result, which was the successful self-rescue of Merrill Lynch (Merrill Lynch for short).

Merrill Lynch is the third largest investment bank on Wall Street. As the parties discussed how to rescue Lehman, John Thain, the last Chief Executive Officer of Merrill Lynch (CEO), who participated in the discussion, immediately realized that Merrill Lynch had a similar problem. If it did not act immediately, then Merrill Lynch would be the next Lehman.

In order to save himself, Thain contacted Bank of America and sold himself to the latter for $50 billion, thus avoiding the end of Lehman.

In fact, from the perspective of game theory, the decision of the US government not to rescue Lehman, a Financial Institution Group that was so large that it had systemic risks, was somewhat random.

This means that the government will eventually rescue the vast majority of Financial Institution Groups that may cause systemic risks, but it should not let the market know the government’s trump card when choosing to give up a Financial Institution Group that can detonate systemic risks to curb moral hazard.

After all, there is a huge social cost to detonating systemic risk.

Government intervention solutions

The above describes the situation of relying on the market to solve the crisis, but in fact, when a major crisis occurs, the government will intervene more or less. Here are three examples according to the degree of government intervention.

First, the government only plays a coordinating role, and it is mainly handled by market forces.

The most typical example of this is the crisis resolution of Long-Term Capital Management (LTCM).

Founded in 1994, LTCM is a hedge fund specializing in highly leveraged carry trades.

LTCM became famous for its outstanding performance once it was established, but in 1998 LTCM suffered a huge loss. Due to LTCM’s highly leveraged trading strategy, its counterparties included many Wall Street Financial Institution Groups, so the crisis of LTCM once led to a possible systemic crisis in financial marekt. To avoid this dangerous situation, the Federal Reserve Bank of New York convened many Wall Street Financial Institution Groups to discuss ways to rescue LTCM. Finally, many Wall Street Financial Institution Groups raised $3.625 billion to rescue LTCM. The Wall Street Financial Institution Group’s investment not only saved the LTCM from the verge of collapse, but also eliminated its threat to the entire financial system.

During the entire incident, the Federal Reserve Bank of New York played a convening and coordinating role, but it did not provide capital or guarantee, and its intervention in the market was limited. It mainly relied on market forces to solve problems.

Second, the government provides some funds for rescue, but the main transactions are still completed by market institutions. A more typical example of this is the handling of Bear Stearns by the Federal Reserve Bank of New York in 2008.

Bear Stearns is the fifth largest investment bank on Wall Street and a very important Financial Institutions Group in the US financial system.

In order to prevent the collapse of Bear Stearns from hitting the entire financial system, the Federal Reserve Bank of New York coordinated JPMorgan Chase’s acquisition of Bear Stearns. In the process, the Federal Reserve Bank of New York funded the purchase of Bear Stearns’ assets for $30 billion, which helped to complete the entire acquisition.

In this deal, the government offered real money to rescue the problem company, but the amount was relatively small and only played a supporting role. The big problems were still solved by the market itself.

Third, the government fully intervened to take over the companies at risk, a classic example of which was the handling of Silicon Valley Bank by US regulators in March 2023.

Silicon Valley Bank, a bank whose main customers are high-tech companies, experienced a severe run in March 2023 because it did not do a good job of risk management. Fearing that panic would spread and trigger a chain reaction, the US Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) acted together and quickly intervened in the crisis.

After regulators took over Silicon Valley Bank, the FDIC announced an unlimited guarantee on all deposits, breaking the previous limit of $250,000. For Silicon Valley Bank, the regulator ousted all its executives and zeroed out the equity value.

From this series of actions, it can be seen that the government took a comprehensive intervention approach in response to the crisis of Silicon Valley Bank, taking complete control of the company, which is the deepest form of government intervention.

How can we resolve the Hengda crisis as soon as possible?

The above discusses different ways to resolve the crisis from the perspective of the market and the government. What is the significance of this for us to deal with Evergrande’s problems?

Here is the first thing to say, some people may say that the examples mentioned above are all Financial Institution Group, Evergrande is a real estate developer, not Financial Institution Group, there are substantial differences between the two.

Indeed, Financial Institution Groups, especially those large Financial Institution Groups that are at the heart of the financial system, often have a direct and huge impact on the entire system, even the macroeconomy, so once these institutions are in crisis, they are often prone to systemic crises. This is the case we saw in the Lehman bankruptcy.

Institutions with systemic risk are often large Financial Institution Groups, but systemic risk is not the patent of large Financial Institution Groups. All institutions that have a direct and huge impact on the economy and finance as a whole are institutions with systemic risk. Evergrande is one of them.

There are three reasons for this.

First of all, the real estate itself in China belongs to the giant industry, and its upstream and downstream implication is very wide, from steel and cement to home appliance decoration, some studies believe that these industries together ** the country’s gross domestic product (GDP) ratio may be close to 30%;

Second, real estate is closely linked to the financial system. When real estate goes wrong, the land market will soon follow. A large amount of financing in China is based on land and real estate as collateral. Once the value of these collateral shrinks, the risk will immediately spread from real estate to the financial sector;

Finally, Evergrande is a typical leader in the real estate industry, and its survival has a significant impact on people’s views on the entire real estate industry, and even on China’s economy.

Evergrande is so important, so how should we handle the current crisis?

First, Evergrande’s self-rescue seems to be very difficult to succeed. Evergrande has been in danger for two years. If self-rescue can work, we don’t need to discuss whether to rescue Evergrande today.

Second, use a market-oriented approach to solve Evergrande’s problems.

First, let Evergrande go out of business. This is difficult because Evergrande is a company with systemic risk. Second, let other companies in the industry merge and acquire Evergrande. This is a better approach because real estate is a sector with a certain technical threshold, and companies in other industries do not easily learn how to run a developer efficiently in a short period of time.

But there are two difficulties here, one is that Hengda’s scale is too large, in 2020 before Hengda’s accident, Hengda’s housing sales area was as high as 80.86 million square meters, ranking first in the country; the other is that Hengda has been suffering for a long time, and no one knows how big a hole there is. The resources required to acquire such a giant company may not be what a developer can have.

Third, the government intervened to rescue Evergrande.

First, the government only plays a coordinating role, allowing companies in the industry to acquire Evergrande, or establish a consortium, with money, such as the Financial Institution Group, and powerful contributions, such as developers. However, as mentioned above, this path is currently not feasible.

The second is that the government provides a small amount of funds, and then joins social funds to jointly acquire Hengda. This method is better, but the coordination cost is higher.

The third is for the government to directly take over Evergrande. This approach is the simplest and most straightforward, and can control the spread of risk in a short period of time. But the biggest problem is that the government does not know how to run a real estate developer well, and it is still such a huge and opaque developer.

From the current situation, each plan has advantages and disadvantages. Rescuing Evergrande, no matter what method, will create a certain moral hazard, but because Evergrande is a company with systemic risk, this forces us to compromise.

Rescuing Evergrande requires two resources, one is technology and the other is funding.

The government and some large companies outside the industry have capital but no technology, and companies in the industry have technology but no capital. Therefore, the best way is to form a consortium and give full play to their respective strengths.

But the drawback of this is also obvious. How to assemble a suitable team is very difficult, which takes time, but whether Evergrande’s crisis has left us enough time is something we don’t know. A direct government takeover can immediately stop Evergrande’s bleeding, but subsequent operations are beyond the government’s ability.

But this approach is not completely impossible. In this regard, we can still learn from the treatment of Silicon Valley Bank by US regulators. On March 10, 2023, US regulators took over Silicon Valley Bank. Just 16 days later, the regulatory bank found the next home for Silicon Valley Bank – First Citizens Bank (First Citizens BancShares).

Many people now have an understandable sense of anger towards Evergrande, especially those who paid for a house but couldn’t get it.

In the future, even if we rescue Evergrande, it will not be all bailouts. We should rescue homebuyers who cannot get houses and suppliers who do not get the money, but we should let Evergrande’s equity go to zero, most of its debt is impaired, and all executives are dismissed, just like the way US regulators handled Silicon Valley Bank.

But the most important thing at the moment is to stop the bleeding of Evergrande and stop allowing its risks to accumulate and spread. At the same time, we should preserve good evidence to lay a good foundation for future accountability in a rule of law manner. Looking at the overall situation, the government should find a way to take over Evergrande as soon as possible.