China Huarong Asset Management Co. ultimately proved too big to fail, but its protracted bailout process demonstrates Beijing’s determination to punish creditors who ignore risks in heavily indebted companies.

The almost five-month saga triggered some of the most extreme swings ever for an investment-grade Chinese bond issuer, changing the way even seasoned money managers evaluate the nation’s $12 trillion credit market. While some Huarong bonds rallied to 97 cents on the dollar after the company unveiled a recapitalization by state-backed investors late Wednesday, the rescue came too late for many bondholders who sold at heavy losses earlier this year.

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