After nearly two years of false starts, last-resort proposals and pleas for more time, China Evergrande, a huge real estate developer, has been ordered to dismantle. It’s a great moment. The collapse of Evergrande in 2021 sent China’s real estate market into a tailspin. Concerns in the real estate sector, where most households park their savings, contributed to the economy falling into a recession.

The scale of Evergrande’s empire is enormous: its developments cover hundreds of cities. He controls dozens of companies and is more than $300 billion in debt, a sum far greater than most believe his assets are worth. The liquidation of the company places it in the same universe as Lehman Brothers, the American bank that declared bankruptcy in 2008 with a debt of 600 billion dollars.

Evergrande’s bankruptcy will unfold in Hong Kong and China. The courts in those two jurisdictions can determine who the winners and losers are among the company’s creditors. Ultimately, government officials in Beijing could get involved. The process will take years and will surely be complicated.

A Hong Kong judge, Linda Chan, on Monday ordered the liquidation of Evergrande and appointed Alvarez & Marsal, a firm specializing in bankruptcy cases, to manage the liquidation. The company’s role will be to help creditors, particularly foreign investors who provided loans to Evergrande, recover some of their money. Speaking to reporters outside the Hong Kong High Court, Alvarez & Marsal executives said they will meet with the company to determine next steps.

“Our priority is for much of the business to be retained, restructured or remain operational,” said Tiffany Wong, CEO of the restructuring firm. She added that she would work with Evergrande executives to make sure creditors receive their money in a way that “minimizes disruption.”

Álvarez & Marsal will need the cooperation of Evergrande executives to determine what assets remain and how to distribute them among creditors. If that doesn’t go well, the company can take the case to a mainland court.

Hong Kong has long had a semi-autonomous status within China that distinguishes it from the rest of the country. By mutual agreement between Hong Kong and Beijing, mainland Chinese courts can recognize rulings by Hong Kong judges. In this case, recognition by a continental court could allow Evergrande’s foreign creditors to make a claim on the company’s assets.

The easy answer is Alvarez & Marsal, which will replace the board of directors of China Evergrande Group, the parent company that oversees the core development business and many other entities, including one that develops electric vehicles.

There is another answer: the Chinese government is hovering over the entire process. Beijing generally has control over foreign investors within China. If Chinese authorities do not want Evergrande creditors to try to claim assets in China, courts can block the creditors.

Álvarez & Marsal could try to physically take over Evergrande’s Chinese subsidiaries by replacing their legal representatives. But Evergrande has hundreds of subsidiaries and local authorities of those units, or even employees of the subsidiaries, could try to block any acquisition.

China’s government plays an important role in all aspects of the economy, but especially in the real estate sector. What has become a deep and alarming slowdown in home sales began when Beijing clamped down on excessive industry borrowing. The government wanted to alleviate the real estate boom.

This led to the sacrifice of dozens of private real estate developers. Many defaulted on their debts; Evergrande was by far the largest. Along the way, developers desperate for cash began making dangerous decisions, such as selling apartments before building them. Now, hundreds of thousands of home buyers have paid for unfinished apartments from companies that no longer exist. Beijing needs someone to foot the bill.

It’s important because Evergrande’s liquidation will be a litmus test for foreign investors in troubled Chinese companies. It is also a test of China’s legal system and its willingness to accept the rule of law in Hong Kong. For years, China has benefited from Hong Kong’s status as a global financial capital, and the predictability of its legal system helped establish it.

Restructuring deals and liquidations involving Chinese real estate companies are relatively new. They involve some of the world’s largest investors, including companies that manage the pension funds of American workers. There are dozens of cases like Evergrande’s in Hong Kong courts.

“Their crisis is symptomatic of property companies and the property market in general,” said David Goodman, director of the Center for China Studies at the University of Sydney. “We should be worried because the Chinese economy is at the heart of the world economy and even small economic shocks can destabilize it.”