AFAIK the challenge is that Evergrande and its bond holders don't make public statements about the repayments, so it's unclear whether they've been made or not.
So, the usual defaulting mechanism does not work. (Size of investment gives claim percentage, bank loans are fulfilled first).
Instead, its a quite bizarr negotiation process- local investors first, then citizens (to prevent a riot) - then if anything is left, the international investors.
If that is the full approach, then a massive retreat of investment out of china is to be expected.
That only happens after default, and default happens when a loan can't be repaid. Evergrande wasn't bankrupt yesterday, so the bankruptcy rules don't apply today. They may tomorrow, for the loans that weren't repaid today (or in the past).
Yeah, people seem to forget that "default" is a technical legal term meaning failure to fulfill a contractual obligation, in this case failure to make an interest payment on a bond by a specified date. If they didn't make the payment today, then they are in default. Bankruptcy is a more nebulous term and can refer to the filing, the court proceeding, or the final judgement. Being in default is a matter of fact and is not dependent on any of that.
