Bailout for SOE unit comes shortly after new reform guidelines' debut

State-owned enterprise unit China National Erzhong Group announced on Tuesday it would receive a bailout after the smelting and forging equipment maker had previously warned of a default, The Financial Times reported. Chronic overcapacity in heavy industry has left Erzhong hobbled and led to losses of RMB8.4 billion (US$1.316 billion) in 2014. But despite Beijing having recently released guidelines for the overhaul of SOEs aimed at imposing market discipline on those owned by the central government, Erhua’s central government-owned parent company, China National Machinery Industry Corp (Sinomach), will now acquire all outstanding bonds from investors, effectively insulating the unit from losses.