Hong Kong’s decision on August 25 to strike China Evergrande from the exchange should feel like a bookend. Instead, it reads like a status update. Eighteen months after a Hong Kong court ordered Evergrande into liquidation in January 2024, trading never resumed and the world’s most indebted developer finally vanished from the ticker. Liquidators have realized about $255 million against roughly $45 billion in claims – peanuts in a mountain of liabilities – while most of Evergrande’s assets remain on the mainland, where recoveries are slow and uncertain. That is not a resolution but a freeze – and it’s no accident.
Since 2021, Beijing has chosen to manage its property reckoning through what might be called “slow bankruptcies.” The logic is understandable: do not let giant developers collapse overnight; protect homebuyers; buy time for local governments and banks. The tools have evolved: curbs on developer leverage through the 2020 “three red lines,” special funding to finish stalled projects, and a growing “white list” of developments eligible for bank support. The organizing principle remains the same: stretch out failure to prevent panic.
The cost of going slow shows up first in the data. New-home prices fell 0.3 percent month-on-month in June, reaching an eight-month low, and property investment dropped 11.2 percent in the first half of 2025. Each extra month that assets sit in limbo erodes household confidence, scares off fresh equity, and keeps even healthy developers from raising capital at acceptable prices. Beijing has thrown ever larger lifelines – most notably the expansion of “white list” lending toward 4 trillion yuan by the end of 2024 and approvals that had already reached about 3.6 trillion yuan by November 2024 – but the longer restructuring drags, the less punch each program delivers.
History offers a helpful translation. In the late Qing, industries were built under the system of “official supervision, merchant implementation” (guandu shangban). Private capital was invited in, but the state retained the reins. The model raised capacity quickly, yet blurred accountability and dulled market discipline. When shocks hit, adjustment stalled because exit rules were fuzzy and politics intervened. China’s property system rhymes with that world: developers have delivered a social good – urban housing – within an administrative framework that resists failure. The lesson from the 19th century is not that public guidance is doomed, but that guidance without credible exits turns dynamism into stasis.
Evergrande’s specifics bring the structural problem into focus. The liquidation sits between two legal universes, with assets and projects largely in the mainland, but many claims offshore in Hong Kong. Hong Kong’s court did its job; the company failed to produce a viable plan and was wound up. But translating that order into predictable recoveries has been slow because cross-border recognition – though piloted since 2021 – still isn’t routine. In the meantime, the homes must still be delivered, which is why Beijing has also doubled down on “ensure delivery” funding – a priority the People’s Bank of China underlined in May 2024.
Local government finance deepens the freeze. For years, cities lived off land sales; when those revenues slumped, local government financing vehicles (LGFVs) inherited projects and debts but not always cash flows. Beijing’s answer has been substitution and extension: large-scale debt swaps to address “hidden” LGFV liabilities, and in some cases bank loan extensions as long as 20 years, as seen in Guizhou. These steps avert visible defaults but strand capital in low-return assets. It is, in effect, slow bankruptcy for municipalities.
There is a better way that keeps the political red line – deliver the homes – while restoring economic oxygen. It starts with accepting that China’s problem is not only a shortage of stimulus; it is a shortage of exits. Rules and timelines – not case-by-case improvisation – are what will turn a freeze into a thaw.
First, China should concentrate big, complex property and LGFV insolvencies in specialist bankruptcy circuits with clear clocks. Designated divisions with jurisdiction over multi-province developer groups and provincial-level LGFVs, published deadlines for plan submission and adjudication, and rotation rules to insulate judges from local pressure would speed decisions and raise credibility. Even small gains in time-to-decision would unlock stranded projects and make “guarantee delivery” funding go further. Think of it as switching from a triage tent to an operating theater.
Second, Beijing and Hong Kong should move their mutual-recognition pilots from boutique to boilerplate. The framework already exists – the 2021 arrangement between the Hong Kong Special Administrative Region and the Supreme People’s Court – but now it needs scale and predictability: model orders, standard timelines, and regular public reporting on cross-border insolvency cases so creditors and homebuyers can anticipate the sequence of events. If Evergrande’s liquidation yields one administrative reform, let it be the publication of a simple playbook any future developer case will follow.
Third, China needs to swap ad-hoc fiscal backstops for a stable, rules-based property tax pipeline. The National People’s Congress authorized pilots in October 2021, and analysts have translated the authorization and scope. Expanding those pilots carefully – starting with second homes and high-end units in the largest markets, capping rates, earmarking proceeds for public services and project completion, and publishing annual evaluations – would give cities a durable revenue stream and reduce the temptation to keep zombie developers alive just to prop up land auctions.
Some worry that faster bankruptcies will trigger social unrest. That risk is real – but delay carries its own risks. When prices keep slipping, when projects linger half-finished, and when households doubt what their deposits will buy, consumption freezes and politics gets brittle. The point of a rules-based exit is not to let anyone walk away from obligations; it is to make obligations legible. If completion funding is ring-fenced and disbursed on milestones, if creditor priorities are known in advance, and if cross-border cases follow standard paths, buyers will return sooner and banks will be more willing to finance the survivors. That is exactly what the “white list” and “ensure delivery” policies aim to achieve – but rules will deliver those goals faster than directives can.
The regional stakes are not abstract. Clearer exits would reduce legal uncertainty in Hong Kong, where many developer bonds are governed and where courts will keep encountering mainland-linked restructurings. They would steady exposures at Asian lenders that have financed developers or LGFVs and temper commodity whiplash – steel and iron ore most of all – caused by stop–start construction cycles. For a snapshot of commodity sensitivity, see recent coverage of iron ore’s reaction to China’s property data.
If the late Qing playbook cautions against “official supervision” without market exits, the post‑Evergrande playbook should do the opposite: keep the state’s commitment to deliver homes, but hard‑wire the exits that allow bad balance sheets to die and good projects to live. China has already assembled many of the pieces – support for completions, bankable project lists, and a cross‑border legal bridge to Hong Kong. What’s missing is the running order and the clock. Speed, not size, is the stimulus that matters now.
Evergrande’s delisting was never going to fix China’s housing market. But it can mark the moment when a slow‑motion crisis gives way to a rules‑driven recovery. The choice is between a decade of low‑grade stagnation and a quicker passage to a smaller, solvent system that buyers and lenders trust. After four long years, confidence won’t return on promises. It will return on delivery – and on knowing, at last, how the story ends.