London Daily

Focus on the big picture.
Sunday, Aug 16, 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
AI Manager at San Francisco Store Recommends Firing Human Employee
Reform UK Unveils Plan to Cut Welfare Spending by More Than £50 Billion a Year
Prime Minister Andy Burnham Praised Extinction Rebellion for Doing a 'Great Service'
UK Wildfire Phone Alert Triggers Backlash as Users Switch Off Emergency Warnings
Heathrow Roads Reopen After Burst Water Main Floods Access to Terminals 2 and 3
Former NBA Players Enes Kanter Freedom and Royce White Say They Will Enter 2027 WNBA Draft
Italian Speed Camera Issues Nearly 32,000 Fines in 10 Weeks, Worth More Than €3 Million
Former Cambridge Professor Jason Arday Found Dead Days After Resigning Amid Plagiarism Row
US Appeals Court Rules AI Agent's Website Actions Are Legally Attributed to the User
France's Constitutional Council Blocks Social Media Ban for Children Under 15
Liechtenstein Changes Royal Succession Rules to Allow Women to Inherit the Throne
Women Allege Rape and Sexual Abuse at British Army College for Teenage Recruits
Minnesota: Two independent investigators posed as Muslims (one wearing a burqa) and showed how they could vote in elections without identification.
UK Prime Minister Andy Burnham Takes Regional Tour to Highlight Local Infrastructure and Environmental Problems
Nigel Farage Wins Clacton By-Election to Return to the House of Commons
Bank of England Warns Rising Inflation Could Squeeze UK Household Incomes
UK Government Announces £65 Million Aid Package for Farmers Hit by Severe Drought
UK Economy Grows 0.4% in Second Quarter Despite Energy Market Pressures
UK Issues Emergency Alert as Severe Wildfires Spread Across England and Wales
UK and Finland Discuss European Defence and Continued Support for Ukraine
Nigel Farage Wins Clacton By-Election to Return to the House of Commons
UK Government Deploys Military to Help Fight Wildfires and Bans Disposable Barbecues
UK Records Hottest Day of the Year as Fifth Summer Heatwave Peaks in Southern England
UK Condemns Houthi Actions and Warns of Red Sea Threat to Global Trade
UK and Solomon Islands Open Wildlife Photography Exhibition in Honiara
UK Small Businesses Face Continued Cash Flow and Tax Pressures
Greatham Marsh Restoration Restores Tidal Wetland in Hartlepool After More Than 200 Years
UK Health Regulator Urges University Students to Check Meningitis and Measles Vaccination Status
Mining Remediation Authority Completes Major Ground Stabilization Works in Scottish Community
UK Food Crime Investigators Seize 33 Tonnes of Illegal Food in Multi-Agency Operation
Technical Qualification Uptake Hits Record High as Advanced Mathematics Results Improve
UK Summer Temperatures on Course to Challenge Long-Standing Records, Met Office Says
UK Farmers Bring Forward Cereal Harvests as Drought Threatens Yields
Wildfires Surge Across England and Wales as Fire Chiefs Report Record July
UK Nurses Warn of Heat Risks as Hospital Staff Struggle With Extreme Temperatures
Southern Water Seeks Drought Order for Hampshire and Isle of Wight Amid Water Shortages
UK Heatwave Pushes West London Temperature to 38.1 Degrees as Health Alerts Continue
UK Economy Grows 0.4% in Second Quarter Despite Global Uncertainty
China’s Kimi Launches AI-Focused Credit Card With Agricultural Bank of China and American Express
UK Residents Gather to Watch Rare Partial Solar Eclipse
Reform UK Deputy Leader Richard Tice Faces Criticism Over Legal Threat Against Guardian Journalist
Michael Forsyth Elected Speaker of the House of Lords
Cambridge Researchers Launch £20 Million Human Organoid Drug Testing Programme
Heathrow Loses European Passenger Traffic Lead to Istanbul Airport
Households Near New UK Electricity Pylons to Receive £250 Annual Energy Bill Discount
UK Government Estimates Zero-Hours Contract Ban Could Cost Employers Up to £3 Billion a Year
Robert Jenrick Leaves Conservatives for Reform UK in Major Parliamentary Defection
UK Police Chiefs Urge Government to Block Early Release of Andrew Harper Killers
UK Government Holds Emergency Cobra Meeting as Drought and Heatwave Raise Wildfire Risks
Former Labour Adviser Arrested on Suspicion of Spying for China Held Privileged Access as Top Party Donor
×