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Chinese court guidance aims to smooth developer bankruptcies, reassure creditors

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Zhu Wenqianin BeijingandPeggy YePublished: 11:00am, 9 Sep 2026

China’s Supreme People’s Court has issued the country’s first systematic judicial guidance governing bankruptcy proceedings for property developers, in an effort to end inconsistencies that have slowed disposals and deterred capital in recent years.

The framework called for timely reorganisations of viable developers and prompt liquidations of those lacking sustainable value, according to a statement by the Supreme People’s Court on Monday. It also said asset-management companies and institutional investors should receive higher priority for continuation-of-construction repayment when taking part in stalled project continuations and reorganisations, according to the statement and an analyst.

“This will significantly boost creditor security and help draw more social capital to actively participate in home delivery guarantees and the revitalisation of existing projects,” said Yan Yuejin, vice-president of the E‑house China Research and Development Institute, a Shanghai-based property consultancy.

Now five years into the China Evergrande crisis, the country’s property downturn has spurred regulators to roll out a series of measures to help stabilise the market and streamline bankruptcy proceedings.The guidance comes as courts continue to work through the fallout from major developer failures, including the acceptance of a liquidation petition against Evergrande’s main onshore unit Hengda Real Estate on August 21, a day after its founder Hui Ka-yan was sentenced to life in prison.

When a property developer was going bankrupt, and a residential sales contract was terminated because delivery became impossible, with no realistic prospect of completion, priority repayment should first go to homebuyers for their paid purchase amounts and outstanding personal mortgage loans, the statement said.

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