Investors are looking to the resolution of the Evergrande case to see how China will handle disputes over its deadbeat companies, of which there are dozens in the property sector alone.
Specifically, they will want to see whether the people who are now tasked with carrying out the liquidation will be recognized by a court in mainland China, something that historically has not happened.
Under a mutual agreement signed in 2021 between Hong Kong and Beijing, a mainland Chinese court would recognize the Hong Kong court-appointed liquidator to allow creditors to take control of Evergrande assets in mainland China. But so far only one of five such requests to local Chinese courts has been granted.
Monday’s decision, which was handed down by Judge Linda Chan, had already been delayed multiple times over the past two years as creditors and other parties agreed to adjourn to give the company more time to reach an agreement with creditors on how much they might be paid.
As recently as last summer, it seemed as though Evergrande’s management team and some of its offshore creditors that had lent the company money in U.S. dollars in Hong Kong were closing in on a deal. The talks hit the brakes in September when several high level executives were arrested and, eventually, the founder and chairman, Hui Ka Yan, was detained by police.
The court’s decision on Monday was “a big bang,” Mr. Anderson said, that will “lead to something of a whimper as liquidators chase assets.”