Safely penned in the corporate safari park, the days of ‘Gray Rhinos’ gorging on debt appeared to be over. But as China struggles with a cooling economy and the trade war, they might just make a comeback.

In a move to increase the country’s overseas influence, the Minister of Commerce Zhong Shan announced plans last week to help companies expand into foreign markets through the highly-controversial Belt and Road Initiative.

The decision comes less than a year since Beijing cracked down on Gray Rhino conglomerates. These are rogue ‘creatures,’ which have a habit of charging at any moment, wreaking financial havoc along the way.

“We will guide private businesses to venture abroad in an orderly manner and to take part in the Belt and Road Initiative,” Zhong said in an interview with the People’s Daily, the official newspaper of the ruling Communist Party.

With domestic demand slowing despite renewed infrastructure spending, his comments appear to signal a switch in policy, which would help private sector groups fund their global ambitions.

Telecom giant Huawei, auto major Geely and heavy equipment manufacturer Sany were singled out by Zhong to lead the advance guard in a bid to become “renowned international brands.”

Overseas market

“The ministry will support private firms to explore the overseas market and search for new methods of product distribution to expand consumption,” Zhong said, which raised the specter of government-backed investment.

China has gone down this road before when it urged state banks to support a worldwide drive by homegrown companies in 2012. Leading the stampede six years ago were property and entertainment group Dalian Wanda, Anbang Insurance and HNA, an aviation, real estate and financial services conglomerate.

What happened next was an acquisitions spending spree on an international scale until funding dried up last year.

Since then, Anbang Insurance has been saved from collapse by the government despite having reported assets of 1.97 trillion yuan (US$310.85 billion).

The shockwaves from that shotgun takeover also forced bloated HNA and Wanda to offload newly-acquired companies and slim down their operations.

Corralling the Gray Rhinos became a priority.

“The [Anbang] move has huge significance,” Hu Xingdou, an economist at the Beijing Institute of Technology, said in April. “If something went wrong with Anbang it would lead to massive bad loans in the financial system.”

But the economic landscape in China has changed in the past nine months, dragged down in part by the trade war with the United States. Last week another batch of data released by the National Bureau of Statistics illustrated Beijing’s efforts to stimulate slowing growth.

While industrial output and investment grew faster than expected in October on the back of a raft of government measures, retail sales softened. The property market has also suffered while new car sales have stalled as consumers rein in spending.

Debt problems

There are also concerns about China’s debt problems. Last month, a report released by one of the ‘Big Three’ credit rating agencies, S&P Global, highlighted the risks in a rundown on local government borrowing.

“[Although it] isn’t known, it could be as high as 40 trillion renminbi [$5.78 trillion],” the study stated. “That’s a debt iceberg with titanic credit risks.”

On top of that, alarm bells are ringing about the country’s ballooning external US dollar debt because of a weakening yuan and the spat between Beijing and Washington, which spilled over at the Asia Pacific Economic Co-operation meeting at the weekend.

“We are talking about a huge dollar whammy,” Kevin Lai, the chief economist for Asia excluding Japan at Japanese investment bank and securities brokerage Daiwa Capital Markets, told the South China Morning Post.

“If the yuan continues to depreciate then you will see a dollar debt crisis,” he added, pointing out that China’s $3 trillion liabilities make it especially vulnerable.

Now, if that happened, the threat of rampaging Gray Rhinos would be the least of Beijing’s problems.