London Daily

Focus on the big picture.
Friday, Mar 06, 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
Iceland Supermarket Drops Trademark Challenge Against Icelandic Government in Long-Running Naming Dispute
UK Defence Secretary Visits Cyprus Following Scrutiny of Britain’s Response to Drone Attacks
Questions Grow Over Britain’s Military Readiness as Response to Iran Conflict Draws Scrutiny
UK Offers Failed Asylum Seeker Families Up to Forty Thousand Pounds to Leave Voluntarily
Saharan Dust Could Bring ‘Blood Rain’ to Parts of the UK as Weather Systems Shift
UK Deploys Additional Typhoon Fighter Jets to Qatar and Helicopters to Cyprus Amid Rising Middle East Tensions
Experts Urge Britain to Accelerate Renewable Energy Push as Global Conflicts Drive Up Costs
British Public Shows Strong Reluctance to Join Wider War in Iran
First UK Evacuation Flight Departs Middle East After Lengthy Delay
United Kingdom Imposes New Visa Requirements on Travelers from St. Lucia and Nicaragua
Iran Conflict Strains U.S.–U.K. Alliance as Trump and Starmer Clash Over Military Strategy
UK Interest Rates Could Rise Above Four Percent Again if Energy Shock Continues, Think Tank Warns
Starmer Defends Britain’s Iran Strategy as Badenoch Urges Stronger Military Support
Labour MP Says She Saw No Sign Husband Broke Law After Arrest in China Espionage Investigation
UK Jobless Rate Overtakes Italy’s for First Time in Years as Labour Market Weakens
United Kingdom Suspends Student Visas for Four Countries in Unprecedented Immigration Move
Campaigners Warn UK Student Visa Ban Could Push Migrants Toward Dangerous Channel Crossings
First U.K. Charter Flight for Stranded Nationals Set to Depart Oman Amid Middle East Crisis
France and United Kingdom Deploy Warships to Eastern Mediterranean as Middle East Conflict Escalates
U.K. Arrests Three Men Including Lawmaker’s Partner in Suspected China Espionage Investigation
Trump Says UK–US ‘Special Relationship’ Is Diminished Amid Middle East Dispute
UK Economic Forecasts Face Fresh Strain from Middle East Conflict and Rising Energy Costs
UK Reaffirms Close US Ties After Trump’s Public Criticism
Reeves Stresses Stability and Fiscal Discipline in UK Budget Update as Growth Outlook Shifts
UK Deploys Royal Navy Destroyer HMS Dragon to Cyprus After Drone Strike on RAF Base
Green Party Surges Past Labour in New UK Poll as Traditional Party Support Crumbles
Majority of Britons Oppose U.S. Use of UK Military Bases in Iran Conflict
UK Intensifies Evacuation Efforts from Oman, Working with Airlines to Boost Flight Capacity
Trump Condemns UK and Spain in Unusually Sharp Rift Over Iran Military Action
Trump Repeats UK Claims That Diverge from Verified Facts Amid Diplomatic Strain
UK Arrests Prominent Figures Linked to Epstein Network as Questions Mount Over US Action
Trump Says UK ‘Took Far Too Long’ to Approve Use of Airbases for Iran Strikes
Scope of Britain’s Role in the Expanding Middle East Conflict Comes Under Scrutiny
Trump Says He Is ‘Very Disappointed’ in Starmer Over Iran Comments
U.S. Embassy in Riyadh Struck by Drones Amid Escalating Iran Conflict
Starmer Confronts Strategic Test After Drone Strike Near British Base in Cyprus
Rolls-Royce Chief Signals Openness to Germany Joining UK-Led Fighter Jet Programme
UK Stocks Slip as Escalating Iran Conflict Triggers Global Market Selloff
UK Overhauls Asylum System to Make Refugee Status Temporary
Starmer Warns of ‘Reckless’ Iranian Strikes Amid Escalating Regional Tensions
British Base in Cyprus Targeted as Drones Intercepted Amid Expanding Iran Conflict
Starmer Diverges from Trump on Iran Strategy, Rejects ‘Regime Change from the Skies’
U.S. and Israel Intensify Strikes on Iran as Conflict Expands to Lebanon and Gulf States
Violent Pro-Iranian Protesters Storm U.S. Consulate in Karachi
Missile Debris Sparks Fires at Dubai’s Jebel Ali Port Near Palm Jumeirah
Iran Strikes U.S. Fifth Fleet Headquarters in Bahrain Amid Wider Gulf Retaliation
When the State Replaces the Parent: How Gender Policy Is Redefining Custody and Coercion
Bill Clinton Denies Knowing Woman in Hot Tub Photo During Closed-Door Epstein Deposition
Former U.S. President Bill Clinton Testifies on Ties to Jeffrey Epstein Before Congressional Oversight Committee
Dyson Reaches Settlement in Landmark UK Forced Labour Case
×