Some pundits are suggesting that the way in which the People’s Republic of China handles real estate company Evergrande’s default will say a lot about the utility of investing inside the PRC. The Wall Street Journal even is asking whether foreign investors are second class citizens “now.”

Last things first: foreign investors always have been second class citizens in the PRC. They’ve only recently been “allowed” to become equal partners or majority holders in established PRC companies being newly invested in or in enterprises being newly formed. It’s still the case, too, that as a condition of doing business inside the PRC, foreign companies must “share” intellectual and technology properties with their partners, and they must permit the PRC government to install back doors into those foreign partners’ primary software.

It’s also the relatively new case that, under the 2017 National Intelligence Law, companies must divulge any and all information that the PRC’s intelligence community requests.

Still, the Evergrande outcome will be informative.

Who is still standing when the dust clears will say a lot about the future of China as a place to invest more generally.

In particular, resolving this misconception will be informative:

Oaktree Capital has moved to seize a large chunk of Evergrande’s Hong Kong property, worth an estimated $1 billion, against a secured loan now in default—a property which could have potentially served an important role in Evergrande’s general offshore debt restructuring.

With the Xi Jinping government having, over the last couple of years, phagocyticly absorbed Hong Kong into the mainland body politic, that city no longer is offshore. Whether Oaktree will be permitted to seize that Hong Kong property is an open question, and a question subsequent to a permitted seizure will be the limits the PRC imposes on Oaktree’s disposition of that property.

I’m not sanguine.