London Daily

Focus on the big picture.
Friday, Jun 20, 2025

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
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Iranian Military Officers Reportedly Seek Contact with Reza Pahlavi, Signal Intent to Defect
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Vietnam Emerges as Luxury Yacht Destination for Ultra‑Rich
Plans to Sell Dutch Embassy in Bangkok Face Local Opposition
China's Iranian Oil Imports Face Disruption Amid Escalating Middle East Tensions
Trump's $5 Million 'Trump Card' Visa Program Draws Nearly 70,000 Applicants
DGCA Finds No Major Safety Concerns in Air India's Boeing 787 Fleet
Airlines Reroute Flights Amid Expanding Middle East Conflict Zones
Elon Musk's xAI Seeks $9.3 Billion in Funding Amid AI Expansion
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Israeli Airstrike Targets Iranian State TV in Central Tehran
President Trump is leaving the G7 summit early and has ordered the National Security Council to the Situation Room
Taiwan Imposes Export Ban on Chips to Huawei and SMIC
Israel has just announced plans to strike Tehran again, and in response, Trump has urged people to evacuate
Netanyahu Signals Potential Regime Change in Iran
Juncker Criticizes EU Inaction on Trump Tariffs
EU Proposes Ban on New Russian Gas Contracts
Analysts Warn Iran May Resort to Unconventional Warfare
Iranian Regime Faces Existential Threat Amid Conflict
Energy Infrastructure Becomes War Zone in Middle East
UK Home Secretary Apologizes Over Child Grooming Failures
Trump Organization Launches 5G Mobile Network and Golden Handset
Towcester Hosts 2025 English Greyhound Derby Amid Industry Scrutiny
Gary Oldman and David Beckham Knighted in King's Birthday Honours
Over 30,000 Lightning Strikes Recorded Across UK During Overnight Storms
Princess of Wales Returns to Public Duties at Trooping the Colour
Red Arrows Use Sustainable Fuel in Historic Trooping the Colour Flypast
Former Welsh First Minister Addresses Unionist Concerns Over Irish Language
Iran Signals Openness to Nuclear Negotiations Amid Ongoing Regional Tensions
France Bars Israeli Arms Companies from Paris Defense Expo
King Charles Leads Tribute to Air India Crash Victims at Trooping the Colour
Jack Pitchford Embarks on 200-Mile Walk to Support Stem Cell Charity
Surrey Hikers Take on Challenge of Climbing 11 Peaks in a Single Day
UK Deploys RAF Jets to Middle East Amid Israel-Iran Tensions
Two Skydivers Die in 'Tragic Accident' at Devon Airfield
Sainsbury's and Morrisons Accused of Displaying Prohibited Tobacco Ads
UK Launches National Inquiry into Grooming Gangs
Families Seek Closure After Air India Crash
Gold Emerges as Global Safe Haven Amid Uncertainty
Trump Reports $57 Million Earnings from Crypto Venture
Trump's Military Parade Sparks Concerns Over Authoritarianism
Nationwide 'No Kings' Protests Challenge Trump's Leadership
UK Deploys Jets to Middle East Amid Rising Tensions
Trump's Anti-War Stance Tested Amid Israel-Iran Conflict
Germany Holds First Veterans Celebration Since WWII
U.S. Health Secretary Dismisses CDC Vaccine Advisory Committee
Minnesota Lawmaker Melissa Hortman and Husband Killed in Targeted Attack; Senator John Hoffman and Wife Injured
Exiled Iranian Prince Reza Pahlavi Urges Overthrow of Khamenei Regime
×