In a new scheme launched this month, foreign investors in Chinese companies that have gone bankrupt would be able to liquidate mainland assets across Shenzhen, Shanghai and Xiamen. This is expected to include other Chinese cities too in the future. The move comes on the back of increased exposure to China by global investors even as defaults and restructurings have risen in the nation. Kevin Song, an insolvency practitioner at Borrelli Walsh said, “Once a creditor has appointed liquidators over a group in Hong Kong, that liquidator can apply to mainland Chinese courts to have equal rights over the group’s assets in the mainland”. Since the scheme has not yet been tested and does not guarantee approval of all applications, lawyers say that China needs to demonstrate that foreign creditors can actually recover assets from these companies. While some say this is a game changer, other say that this could cause destabilizing of local economies.
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