Chinese authorities are formulating a plan to assist property developer China Vanke Co. in addressing a funding shortfall of approximately 50 billion yuan this year. The proposal includes allocating 20 billion yuan in special local government bonds to purchase unsold properties and vacant land from Vanke, thereby enabling the company to meet its public and private debt obligations.
This initiative follows a series of interventions aimed at stabilizing Vanke’s financial standing. The Shenzhen government recently restructured Vanke’s senior management, appointing executives from state-owned enterprises to key positions, thereby increasing state oversight. Additionally, major shareholder Shenzhen Metro provided a 2.8 billion yuan loan to Vanke, secured against an 18.3% stake in its property services unit, Onewo Inc.
Despite these measures, concerns persist regarding Vanke’s liquidity. Moody’s Investors Service downgraded Vanke’s credit rating to “Caa1” from “B3”, citing deepening liquidity issues and sluggish sales in a weakened property market. The downgrade reflects the company’s ongoing challenges, including declining sales, continued pressure on profit margins, and significant losses from asset disposals and impairment charges.
Vanke has committed to raising funds through operations and financing to meet its bond obligations. The company plans to accelerate asset sales and exit non-core businesses to improve its financial position. Investors view Vanke’s ability to manage its debt as a critical indicator of homebuyer confidence and the overall stability of China’s property sector.
The proposed government support plan underscores the authorities’ efforts to prevent defaults by major developers and maintain stability in the property market. However, analysts note that the loan amount is small relative to Vanke’s over 30 billion yuan in bonds maturing later in 2025, highlighting the need for further financial measures or stronger home sales to ensure liquidity.
Shares of Vanke surged in Hong Kong and Shenzhen trading following the news of the proposed funding plan. The property sector also saw gains, with significant increases in shares of other developers, reflecting investor optimism about potential government support for the industry.
