London Daily

Focus on the big picture.
Thursday, Aug 27, 2026

Are foreign investors in China second class citizens now?

Are foreign investors in China second class citizens now?

Battle for Evergrande’s assets heats up; who is standing when the dust clears will say a lot about investing in China
As Chinese property giant Evergrande continues to struggle, the battle for control of its assets is heating up. Who is still standing when the dust clears will say a lot about the future of China as a place to invest more generally.

Hong Kong listed China Evergrande Group has already defaulted on a portion of its offshore debt, and its bonds are still trading at deeply distressed levels. But the past week has witnessed two important developments.

First, following a letter from offshore debtholders threatening unspecified legal action, Evergrande Group announced Wednesday that it aims to release a “preliminary restructuring proposal" within the next half year. Second, the Financial Times reported Thursday that Los Angeles-based Oaktree Capital has moved to seize a large chunk of Evergrande’s Hong Kong property, worth an estimated $1 billion, against a secured loan now in default—a property which could have potentially served an important role in Evergrande’s general offshore debt restructuring. Oaktree has another secured loan to a separate Evergrande mega-project onshore, according to the FT.

Meanwhile, since the company has managed to avoid a technical default onshore thanks to negotiations with creditors there—who may ultimately be expecting some roundabout assistance from Beijing—money continues going out the door for operations and Evergrande continues to spend to build apartments owed to its customers.

That raises the risk that, by the time secured offshore creditors like Oaktree also collect and a formal restructuring proposal from Evergrande arrives, there might not be many scraps left to fight over.

To be sure, many offshore bondholders’ predicament is partly of their own making. Rating agency Moody’s notes that covenants on Evergrande’s bonds—limiting, for instance, the amount of leverage that subsidiaries could take on and constraining dividend payments—have been significantly weakened over the past decade. And holding the unsecured debt, in particular, of a highly levered company like Evergrande which has most of its assets onshore under the auspices of its mainland subsidiaries was always inherently risky.

Still, if Evergrande’s offshore bondholders do get roundly stiffed, it is difficult to deny that the optics for China as a place to invest writ large are terrible—especially given what holders of U.S.-listed Chinese educational and internet technology stocks have experienced over the past 12 months.

Demand for Chinese corporate dollar debt, previously an important funding source both for regular companies and Chinese local governments through their corporate fundraising vehicles, could take a large and permanent hit. And if Oaktree decides to chase the onshore Evergrande project through the Chinese courts and fails, it would be a damning indictment of the business environment for foreigners in general.

Yet Chinese borrowers and debt investors, outside of real estate at least, don’t seem to be paying a toll for foreigners’ treatment at the moment: Prices of both investment grade and high-yield debt onshore have generally drifted upward since late 2021 as monetary easing has gained steam and confidence has grown that onshore, at least, systemic Evergrande-related turbulence can be averted.

Little wonder many offshore investors are gnashing their teeth.
Newsletter

Related Articles

0:00
0:00
Close
TSA Unveils Major Airport-Security Overhaul as It Drops Gold+ Privatization Plan
CIA Chief Warned Russia Against Attacking NATO in Secret Moscow Mission
Raheem Sterling Charged With Dangerous Driving After Lamborghini Crash
The Secret Dolly Parton Kept Until Her Death: "She Was Much Sicker Than She Let On"
Middlesbrough House Fire Kills Woman and Seven-Year-Old Girl
Prince Harry and Meghan Markle Return to UK Amid Renewed Media Attention
Raheem Sterling Charged With Dangerous Driving After London Collision
Greenpeace Threatens Legal Action Over Crown Estate Offshore Wind Leasing
Nvidia Revenue Surges to Ninety-Six Point Two Billion Dollars on Artificial Intelligence Demand
Meta Agrees to Global Youth Safety Changes Following Multi-State Legal Settlement
UK Government Plans Autumn Summit With Scottish, Welsh and Northern Irish Leaders
CMA Caps Veterinary Prescription Fees at Twenty-One Pounds
Thames Water Pilot Records Forever Chemicals at Thirteen Times the Legal Limit
Kent Meningitis Outbreak Reaches Thirty-Four Confirmed Cases
Forty Children Missing From UK Asylum Accommodation Remain Unaccounted For
UK Court Upholds VAT on Private School Fees
US Designates Palestine Action as Foreign Terrorist Organization
UK Approves Massive New Chinese Embassy Complex in London Amid Security Concerns
Prime Minister Andy Burnham Visits Kyiv and Offers Cruise Missile Designs to Ukraine
Glacier Collapse, Not Earthquake, Triggered Deadly Nepal-Tibet Flood
Andy Burnham Drops Plan to Cap Political Donations
Conservative Leadership Contest Intensifies as Robert Jenrick Attacks Kemi Badenoch
French-Born Defence Secretary Wes Streeting Condemns Homophobic Abuse Since Taking Office
UK Government Delays Commercial Robotaxi Rollout in London Over Regulatory Gaps
NHS Complaints About Autism and ADHD Care Waiting Times Triple Over Five Years
UK Government Launches 10,000 Work Placements for Young People With Sainsbury's
NHS England to Offer Free At-Home Cervical Cancer Screening Kits
EU Biometric Border Checks Cause Delays of Up to Five Hours for British Travellers
US Imposes Economic Sanctions on UK-Based Protest Group Palestine Action
Two Planned UK Datacentres Could Produce More Annual Carbon Emissions Than ExxonMobil's Entire UK Operation
London Surgeons Complete First Artificial Intelligence-Assisted Brain Tumour Removal
UK Services Growth Rebounds as Consumer Confidence Reaches Two-Year High
Ofgem Confirms Four Percent October Energy Price Cap Increase for UK Households
Government Considers Insolvency Law Changes to Bring Thames Water Into Public Ownership
Andy Burnham Signs Artificial Intelligence Defence Pact During Visit to Kyiv
Church of England Faces Renewed Scrutiny Over Historical Safeguarding Failures
Reform UK Proposes £30 Tax Credit for Long HMRC Telephone Queues
Greater Manchester Secures More Than £100 Million to Upgrade Victorian Railway Stations
East Midlands Railway Urges Essential Travel Ahead of Bank Holiday Strikes
UK Economy Grows 0.4 Percent in Second Quarter as Global and Energy Pressures Weigh
UK Government and Sainsbury’s Launch Plan for 10,000 Youth Work Experience Placements
Scottish Government Plans Tighter Remote-Working Rules and Possible Voluntary Redundancies
Scottish Budget Faces More Than £700 Million Reduction After Tax Revenue Adjustment
Nearly 100 Labour MPs Press Andy Burnham to Back Electoral Reform Commission
UK Energy Price Cap Rises Four Percent to £1,723 as Middle East Conflict Drives Wholesale Gas Costs
Turnbull Warns AUKUS Could Leave Australia Without Promised Nuclear Submarines
California Billionaires Pour More Than $150 Million Into Fight Over Proposed Wealth Tax
German Broadcaster Goes Dark to Warn AfD Could End Its Saxony-Anhalt Service
Badenoch Plans Major Shadow Cabinet Reshuffle as Tories Struggle in Third Place
UK Government Demands Action Against Social Media Content Promoting Dangerous Driving
×