Who’s Buying China Debt?
- Mitt Chen
- Aug 5, 2025
- 3 min read
Distress, Discounts, and the Global Gamble for 200% Upside
Twenty cents on the dollar for a bond? That’s not a bargain — it’s a question.
China’s real estate developers didn’t just wobble — they faceplanted into global headlines. Country Garden, Evergrande, Vanke — the darlings of China’s boom cycle are now case studies in capital chaos.
Their bonds? Trading at 13 to 22 cents on the dollar. Their problem? Roughly ¥700 billion (~$5B) in property debt coming due in 2025.
And yet — allocators are lining up. Because where the world sees crisis, sovereign capital sees entry points.
Data Meets Drama
Let’s follow the blood trail — and the bounce.
In 2023–2024, Country Garden bonds dropped to 9¢. After stimulus? They jumped past 70¢ (Reuters).
Vanke bonds hovered at 20–22¢. With local purchase curbs relaxing, investors smell catalysts (Nikko AM, WSJ).
Evergrande’s collapse prompted lawsuits, restructures, and ghost-mall memes. But funds stayed circling.
Why? Because that markdown isn’t just a discount. It’s a vote. And policy can flip the script overnight.
The Allocator Archetypes
The Big Dogs
Oaktree Capital: Managed the 2022 Evergrande mess. Still sniffing around the rubble.
BFAM Partners: Took 11–26% losses, then sued for repayments like it was Tuesday.
MatlinPatterson, Mudrick: Quietly stacking bonds while retail tweets about doom.
The Wild Cards
I spoke with a solo LP who flew into Hong Kong just to meet a distressed debt broker over dim sum. “If Vanke settles and Beijing lifts curbs, I’m sitting on 200% upside.” That’s not optimism. That’s strategy with a passport.
How It’s Played
The China Distressed Deal Map
Step | Description |
Deal Access | Private brokers in HK/SG. Invite-only chats. Zero LinkedIn. |
Catalyst Risk | Local gov support, home purchase policies, PBoC announcements |
Structuring | Offshore SPVs in Singapore, Dubai DIFC, or HK LP wrappers |
Dual Alpha | Buy low + policy trigger = 2x–3x upside. Add legal buffer. |
Solo Allocator Playbook
Here’s what every allocator flying into Seoul, eating Hainan chicken while refreshing Bloomberg, should consider:
✅ Risks You Must Model:
Yuan vs USD volatility
Lien enforcement: onshore vs offshore
Liquidity path: can you even exit in time?
Catalyst confidence: Is Beijing signaling or ghosting?
🔁 Example Setup:
Buy: $500K in Vanke bonds at 22¢
Structure: Singapore SPV
Monitor: policy cycles, creditor committee updates
Exit: Secondary via broker or convert into onshore claim
This isn’t passive income. It’s geopolitical arbitrage.
Case Study: Shimao’s Bounce Back
In early 2025, Shimao Group restructured $11B in offshore debt. Result? ✅ 98.8% creditor approval ✅ Recovery at 60–80¢ ✅ Quick 2–3x gain for anyone who bought sub-25¢ (Reuters, Bloomberg, FT)
One Vault contributor said: “I didn’t even tell my family. They’d have thought I lost my mind. Now I’m up 230% and structuring round two.”
Mitt’s Take
Let’s be clear: Distressed China debt isn’t for pitch decks. It’s for allocators who:
Think in policy triggers, not hashtags
Understand legal geography
Have time zone fluency and airport Wi-Fi
Know that “uncertainty” is where the alpha lives
Most investors are chasing 5% safe yield. You? You’re deploying into chaos with structure, catalysts, and quiet conviction. Just don’t confuse entry with rescue. This game rewards prepared risk — not emotional conviction.
The Vault View
Vault intel confirms a shift:
A rising group of female LPs flying under the radar, stacking China exposure via dual-citizen setups.
Private Telegrams sharing entry windows on developers others have already written off.
Structuring firms in Dubai, Singapore, and Georgia building recovery funds disguised as “strategic RE portfolios.”
The distressed edge isn’t gone. It just stopped tweeting.
Final Take
Buying 20¢ bonds in a politically-sensitive, state-massaged sector?
That’s not reckless. That’s risk-adjusted sovereignty.
And if it plays out, you’re holding paper that tripled while others argued on FinTwit.
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