Commentary We’re about to find out just how “free” China’s financial markets really are. As the restructuring saga around real estate developer China Evergrande continues to drag out, recent developments could escalate into a financial standoff previously never before seen in China’s capital markets. A U.S. distressed credit fund—which owns a piece of Evergrande’s defaulted dollar bonds—has thrown down the gauntlet in a bid to protect its interests, potentially ruining Beijing’s plans to restructure and rescue Evergrande. Here’s the background. After leverage limits on China’s property developers were tightened by Beijing, Evergrande finally defaulted on its offshore bonds in December 2021. Since then, Beijing and Guangdong governments have attempted to avoid a disorderly collapse of the company by orchestrating a proposed restructuring. Full details are still being worked out, but it’s believed that Evergrande could be liquidated, and its assets sold off to various state-owned and private holders. In turn, …