Insights

• Relations between China and the U.S. will likely remain tense for the foreseeable future, as evidenced by the recent U.S. law mandating TikTok be divested or face a ban.
• Companies and individuals with perceived Chinese associations – including in Greater China, Southeast Asia and the wider region – could be at risk of invasive and politically motivated government enforcement actions.
• Those at risk can take several proactive steps to protect their assets, reputation and liberty.

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• Recent challenging economic conditions in China are putting many PRC companies in distress.
• This puts offshore joint venture partners and private credit lenders at risk, potentially having to attempt a difficult recovery by taking over PRC projects, companies or assets.
• A new Chinese company law may give investors an upper hand by strengthening their information rights, which when combined with a multijurisdictional strategy allow a more effective takeover.

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• Deals and partnerships between Latin American and Chinese companies are growing as economic ties between the two regions deepen.
• However, unique risks are involved if a dispute arises with the Chinese company – the Chinese legal system could create barriers to payment, even with an award or judgment in hand.
• Latin American companies and investors should consider cross-border strategies to increase their leverage.

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• The United States and its allies continue to use sanctions to attack adversarial governments and their perceived allies, putting companies and individuals with tenuous or merely alleged ties at risk.
• Recent sanctions have targeted Russia, but PRC companies were designated in the February 2024 round, signaling increasing risk to PRC individuals and business if China-U.S. relations deteriorate.
• At-risk individuals and business should take proactive steps to prepare.

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• Unfavorable economic conditions in China are putting many offshore companies in distress.
• In a worst-case scenario, joint venture partners and private credit lenders may have to attempt to take over onshore projects, companies and assets.
• A new Chinese company law coming into effect on July 2024 could smoot this path to recover – including by making it easier to replace legal representatives.

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• Brazil is seeking more investment from China, with almost half of China’s investments in South America being in Brazil.
• However, the recent wave of insolvencies in Brazil could threaten these investments, particularly if fraud is uncovered, leaving investors to navigate the complex Brazilian insolvency landscape.
• By undertaking a more assertive, multijurisdictional approach, combined with new insolvency tools in Brazil, investors can seek to gain the upper hand.

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• Investments from the Middle East into Mainland China are growing recently as many see increasing opportunities for returns.
• However, there are risks that may materialize if investors become embroiled in a global dispute with Chinese companies.
• Investors should consider ways to increase their leverage and expand their options, including by bringing disputes directly into China through Hong Kong.

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• Many Chinese debt issuers are still undergoing a wave of defaults, putting offshore general unsecured creditors at risk.
• One way to secure substantial recovery is to enforce keepwell agreements, promises by a PRC onshore parent company to maintain a debt issuer’s liquidity and solvency.
• This can expand the range of enforcement targets, increasing creditors’ options and chances of success.

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• The U.S., UK and their allies are continuing to find tools to exert pressure on China.
• Businesspeople in Greater China with global interests could become targets of financial sanctions if diplomatic relations between China and the U.S. deteriorate further.
• We explain how financial and wealth advisors can mitigate the risks these clients face if they act early and decisively.

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• More Chinese companies are entering the Korean market, running head-on into family-owned conglomerates known as chaebols.
• In a dispute, the overwhelming dominance of chaebols and the intricacies of the Korea legal market make it hard for Chinese companies to find a way out.
• However, by combining creative legal and PR strategies, Chinese companies can put pressure on their competitors and protect their business interests.

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• In Chapter 11 bankruptcy cases where the chances of recovery seem slim, global unsecured creditors may have to get creative and look outside the U.S. to improve their prospects.
• Assets in the People’s Republic of China (PRC) – the world’s second largest economy – offers a surprising source of asset recovery opportunities.
• We explain how creditors can unlock value in China and maximize their recovery.

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• As geopolitical tensions heighten, Chinese ultra-high-net-worth individuals may become increasingly at risk of becoming the target of forfeiture by hostile foreign governments.
• Governments around the world have shown increasing willingness to go after assets owned by those in disfavored jurisdictions.
• By deploying a coordinated global strategy, Chinese UHNWIs can lawfully defend their legitimately earned wealth.

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• A Chinese court recently recognized a commercial judgment issued by the English High Court in a landmark judgment.
• China has also made it easier for Hong Kong arbitrations to be recognized and enforced in China, as well as opening the door to interim measures.
• Our Claim Monetization team analyzes what these developments mean to foreign judgment and award creditors looking for opportunities in a historically tricky jurisdiction.

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• Mainland China is undergoing a wave of credit defaults, and creditors should use every tool available to maximize recovery.
• Keepwell agreements, a promise by a PRC onshore parent company to maintain an offshore debt issuer’s solvency, is one option for overseas enforcement.
• Creditors can use them to launch a multijurisdictional recovery campaign to drive up pressure on the debtor and reach a near-term settlement.

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• Offshore bondholders of distressed Chinese real estate companies often lack leverage in restructuring negotiations, with those companies’ assets located mostly in China.
• China Evergrande Group is just one of the many Chinese real estate companies teetering on default, with wide-ranging consequences.
• However, by taking deploying creative strategies and taking positions against competing stakeholders, activist bondholders can carve out a direct path to monetization.

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