London Daily

Focus on the big picture.
Wednesday, Jun 24, 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
UK Biotechnology Sector Receives Increased Public Funding to Support Regional Growth
Police Chiefs Update National Protest Management Guidelines Amid Rising Demonstration Activity
UK Aviation Regulator Expands Support for Regional Airports to Strengthen Domestic Routes
CMA Launches Investigation Into Retail Pricing Across UK Grocery Sector
UK Energy Operator Warns of Winter Supply Pressures Despite Stable Overall Grid Outlook
UK Research Council Expands Funding for Regional Biotechnology and Life Sciences Clusters
UK Compensation Scheme for Post Office Horizon Scandal Reaches 80 Percent Completion
Police Chiefs Issue Updated National Guidance on Managing Large Public Demonstrations
UK Expands Regional Airport Funding Scheme to Boost Domestic Connectivity
UK Competition Watchdog Launches Inquiry Into Grocery Pricing Practices
National Grid Warns of Tight Energy Management Needs During Upcoming Winter Peak Demand
UK Education Department Introduces National Standards for AI Use in Secondary Schools
UK High Court Clears North Sea Carbon Capture Project After Final Legal Challenge Fails
Northern Ireland Leaders Hold Emergency Talks on Trade Disruption Under Windsor Framework
Welsh Government Moves to Expand Social Housing in Response to Severe Affordability Pressures
UK Economy Sees Unexpected Rise in Business Investment in Second Quarter, ONS Data Shows
Scottish Government Unveils Multi-Billion Pound Investment Plan for Renewable Energy and Grid Expansion
UK and EU Agree Enhanced Defence Cooperation Pact Covering Intelligence and North Sea Security
Prime Minister Orders Independent Review of NHS Performance After Record Waiting Lists
Bank of England Holds Interest Rates at 5 Percent as Services Inflation Remains Persistent
UK Heatwave Disrupts Transport, Healthcare and Public Services as Red Weather Alerts Expand Nationwide
Barclays Warns of Growing Cyber Risk Divide Between Large UK Firms and Micro Businesses
European Defence Plans Including Ukraine Integration Prompt UK Strategic Reassessment
UK Equity Markets React as US–Iran Peace Roadmap Eases Oil Price Pressures
United Kingdom Expands Global Clean Energy Partnerships With Brazil, Morocco and Tanzania
Lord David Frost Urges Incoming UK Leadership to Abandon EU Regulatory Reset Strategy
Housing Groups Support Amendment to Strengthen Fire and Gas Safety Access Powers in Social Housing
South London NHS Estates Staff Ballot on Industrial Action Over Pay Structures in Hospital Maintenance Services
United Kingdom Government Invests £60 Million in AI Research Labs at Oxford and University College London
Barclays Cyber Security Report Highlights Rising Threat Exposure Among UK Small Businesses in AI-Driven Attacks
UK Met Office Heatwave Triggers Transport Warnings as Rail Operators Urge Cancellations Amid Infrastructure Strain
South London NHS Estates Workers Ballot for Strike Action Over Pay Disputes Across Major London Hospitals
Barclays Warns of Severe Cyber Security Gap Between Large Corporations and Small Businesses in the United Kingdom
United Kingdom Government Allocates £60 Million for Artificial Intelligence Research Laboratories at Oxford and UCL
National Health Service Approves Teplizumab Treatment to Delay Onset of Type One Diabetes in First European Rollout
Met Office Issues Rare Red Extreme Heat Warning Across London, South East and West Midlands as Transport and Health Systems Face Disruption
Prime Minister Keir Starmer Resigns After Labour Party Revolt Following Economic Stagnation and Local Election Losses
United Kingdom Economy Contracts for Second Consecutive Month as Private Sector Weakens and Job Loss Fears Rise
Taxpayer Support Grows for Higher Digital Levies on Multinational Tech Companies
Bank of England Signals Caution Over Inflation Despite Easing Energy Prices
Lloyds Banking Group Expands Artificial Intelligence Hiring Amid Sector-Wide Automation Shift
Film Producer Corporate Collapse Leaves Creditors Facing Unrecoverable Losses
UK Ten-Year Brexit Anniversary Highlights Ongoing Political and Economic Uncertainty
Nottingham Maternity Scandal Inquiry Reveals Systemic Failings in NHS Care
Met Office Heatwave Prompts Public Health Warnings Across United Kingdom
Concerns Rise Over Fiscal Stability as Political Uncertainty Weighs on UK Borrowing Costs
UK Taxpayers Back Higher Digital Taxes on Global Technology Firms, Survey Shows
Bank of England Holds Interest Rates Steady Amid Persistent Services Inflation
Reform UK and Opposition Leaders Call for General Election Following Starmer’s Departure
Ten Years After Brexit Referendum, UK Faces Ongoing Political Fragmentation and Economic Debate
×