HONG KONG (Reuters Breakingviews) - The time has come for China to confront a too-big-to-fail quandary. In a letter to local government officials, highly indebted property developer China Evergrande contends that if it doesn’t secure approval soon for its reverse merger plan, it will wreak widespread havoc. Although the company says the missive is fake, the questions in it regarding systemic risk are real for investors and Beijing. Evergrande beseeched officials in its home province of Guangdong for assistance with a so-called back-door listing, according to a copy of the Aug. 24 letter, whose authenticity was confirmed by Reuters sources. The idea, first proposed as part of an October 2016 restructuring, was for subsidiary Hengda to combine with a publicly traded state developer. If the deal doesn’t happen by January 2021, a group of investors can demand repayment of some 144 billion yuan, or about $21 billion, all of Evergrande’s cash as of June 30. The letter suggests a private sense of concern that Evergrande rarely exhibits in public. Chairman Hui Ka Yan often provides a helping hand to Beijing, supporting national goals such as poverty alleviation, even as its own debt load has surpassed $100 billion. Evergrande shares tumbled by as much as 6% on the news. S&P Global cut its outlook on the credit rating to negative from stable. The Shanghai Stock Exchange temporarily suspended trading in two of the company’s bonds on Friday. The lengthy delay obtaining approval could have to do with an unofficial rule from 1993 that restricts Chinese developers from being publicly traded on the mainland, in a bid to contain some of the country’s real estate exuberance. Either way, Beijing is in something of a bind. The consequences laid out in the letter would hit dozens of lenders including Agricultural Bank of China, while potentially affecting 3 million jobs. It’s possible that the fallout is being exaggerated to put pressure on authorities to let Evergrande proceed with its plan. At the same time, the company has been taking multiple steps to raise cash. And Evergrande’s backers have a legitimate claim on a very large sum. All of that will combine to force a reckoning soon.