China's ruler Xi Jinping hoped to never hear bad news from Hong Kong again after successfully destroying the financial metropolis' special democratic status. But he now finds himself beset by new problems, not with democracy activists, many of whom he imprisoned or exiled, but with Hong Kong's judiciary.

This led to the bankruptcy of the Chinese real estate giant Evergrande, which had a debt of 300 billion dollars. The court will now appoint insolvency administrators for the company and attempt to divide the rest of the company's assets among creditors. This will likely be difficult because the People's Republic does not recognize the Hong Kong ruling.

Although Hong Kong is part of the People's Republic, British-era laws still apply here. Therefore, the courts still enjoy a certain degree of independence, protecting the once proud semi-autonomous city from the clutches of Beijing's dictatorship.

For Xi, the right is to yield to the will of the party

The Hong Kong ruling is unlikely to be anything more than comforting to China's rulers, because for the dictator the right has to submit to the will of the party and not the law. In the People's Republic, trials are based on political and not legal aspects.

Xi Jinping had a very different idea of ​​how to handle China's booming real estate industry. As in other sectors of the economy, the ruler had in mind a consolidation that would benefit those companies that did not escape the control of the party.

In fact, the People's Republic under Xi long ago moved away from the mechanisms of a free market and transformed into state capitalism. Real estate development was one of the country's most important economic sectors during China's capitalist phase, accounting for about 25 percent of China's total economic output.

Evergrande speculated with investors' money

The provinces of the People's Republic poured money into their coffers primarily through the sale of building land, and the newly created middle class invested their savings in real estate. The rural exodus and the corresponding urban planning made the concrete business the gold standard in the emerging country.

But Evergrande and other actors speculated with their investors' money and bet it on daring projects that ultimately did not fulfill their promises. In order not to expose fraud, old projects were completed with fresh money.

The fraud was exposed in 2021 when the central government in Beijing changed the rules for the construction of large-scale projects. The true objective of the Communist Party was to reduce the playing field to allow the nomenklatura greater control.

Until then, it was common practice in China for buyers to pay for apartments before they were built. A circumstance that proved fatal for many people in China. Today, many of those deceived live in the shells of their unfinished apartments, without electricity or water. It is not clear how many unhappy owners have to live like this. In any case, across the country tens of millions of apartments are said to be unfinished.

If the leaders do not propose anything, there will be large protests.

Since the ruling is not final in mainland China, where most of Evergrande's creditors are located, there has not been a major stock market crash there today, unlike in Hong Kong. The strategy of Beijing's leaders will probably be to delay for as long as possible the legal clarification of the question of jurisdiction and the legal force of the Hong Kong ruling.

In the past, party officials have repeatedly suggested that those affected by Evergrande could receive help from the government. This seems appropriate now more than ever. Thousands of jobs and the savings of millions of people depend on the construction industry.

If the leaders around the dictator Xi do not contribute anything in this regard, there is a risk of large protests that are in no way inferior to those that occurred against his failed zero round policy in November 2022. The economy of the The Middle Kingdom has not fared well since then. Xi really doesn't need any more bad news, whether from Hong Kong or other corners of the People's Republic. Evergrande's bankruptcy is becoming a high risk factor for Beijing.