China Vanke, once a pillar of stability in the country's turbulent property market, announced a projected net loss of $6.2 billion for 2024, marking the largest annual loss in the developer's history. The company also revealed a sweeping management reshuffle, with Chairman Yu Liang and CEO Zhu Jiusheng stepping down. The shakeup comes as the embattled developer grapples with mounting debt, falling sales, and a volatile real estate market.
Yu Liang, who had served as Vanke's president and later chairman for over two decades, will remain with the company as a director. Zhu Jiusheng, who joined Vanke in 2012 and became CEO in 2018, resigned entirely, citing health issues. Zhu's departure followed unconfirmed reports that he had been detained by public security authorities earlier this month, though Vanke has not commented on these allegations.
The chairmanship will now be held by Xin Jie, who is also the chairman of Shenzhen Metro Group, a state-owned enterprise and Vanke's largest shareholder. Analysts view Xin's appointment as a signal of increased state oversight and potential financial intervention. Shenzhen Metro's involvement is seen as critical to stabilizing the company, as Vanke faces $4.9 billion in debt maturing this year.
The Shenzhen State-owned Assets Supervision and Administration Commission "has the ability, strength, and enough 'bullets' to support Shenzhen Metro Group to promote stable development of Vanke through all possible means," a representative from the commission told state-owned Nanfang Daily.
Vanke's struggles reflect broader issues in China's real estate sector, where declining homebuyer confidence and oversupply have created a cash-flow crisis for many developers. Once considered resilient in the face of market turmoil, Vanke reported a 34.6% year-on-year decline in total sales for 2024, amounting to 246 billion yuan ($33.7 billion). Falling profit margins, credit impairments, and losses from bulk asset transactions compounded the company's financial woes.
"Vanke's issue stems from the imbalance between supply and demand in China's housing market," said Shen Meng, director at Beijing-based investment firm Chanson & Co. "With demand waning, no matter how many homes are built, they struggle to sell, preventing the formation of a closed cash-flow loop, as reported by the South China Morning Post. While state-owned enterprises can offer financial support, they can't solve the problem of selling the properties."
Despite the grim outlook, Vanke's bonds showed signs of recovery on Monday following announcements of early debt repayments and state-backed confidence. The company stated that it would redeem 1 billion yuan ($137.7 million) in 2027 notes ahead of schedule in March, a move interpreted by investors as a sign of its ability to meet short-term obligations. Vanke also recorded an 82.75 million yuan ($600 million) profit after transferring its equity and income rights in a Shenzhen skyscraper project to Shenzhen Metro.
Fitch Ratings and S&P Global, however, have expressed concerns about Vanke's creditworthiness. Fitch downgraded Vanke's long-term issuer default ratings to B- from B+ on January 20, marking the fifth downgrade since July 2023. S&P has echoed similar concerns, highlighting the risks tied to the developer's liquidity challenges.
The property sector's turbulence has already claimed several high-profile casualties, most notably China Evergrande, which was ordered into liquidation following an offshore debt default. Analysts worry that Vanke's financial troubles could further erode homebuyer confidence, destabilizing the fragile recovery seen in recent months.
In response to these challenges, Vanke announced plans to focus on its core businesses while leveraging the resources of its state-linked shareholders. The company pledged to implement measures aimed at mitigating risks and safeguarding the interests of homebuyers, creditors, and investors.
Raymond Cheng, head of China research at CGS International Securities HK, interpreted Shenzhen Metro's involvement as a step toward nationalization. "Shenzhen SASAC stepping in essentially means a nationalization of Vanke, which is not a bad thing. Creditors now can be relieved about Vanke's repayment ability," Cheng said.
