Shenzhen Metro Offers Vanke a $578 Million Lifeline to Repay Debts
By Chen Bo and Denise Jia
China Vanke Co. Ltd., one of China’s largest real estate developers, has secured a three-year loan of 4.2 billion yuan ($578 million) from its largest shareholder, Shenzhen Metro Group Co. Ltd., to help repay maturing debt amid mounting financial pressure.
The loan carries an interest rate of 2.34% and requires Vanke to provide 6 billion yuan in collateral within three months. If it fails to meet this condition, it must either repay the loan immediately or provide alternative guarantees. Initially, three Vanke subsidiaries will secure the loan until the required collateral is in place, Vanke said in a statement Friday.
Vanke has more than 36 billion yuan in public debt due in 2025, including nearly 10 billion yuan in the first quarter. Long seen as a reliable player in China’s turbulent property sector, the company is now struggling with falling sales and financial difficulties, forcing it to seek government support.
A bailout had been expected for months, materializing on Jan. 27 when Shenzhen Metro’s chairman, Xin Jie, replaced longtime leader Yu Liang as Vanke’s board chairman. The shake-up saw the resignation of Vanke’s president, Zhu Jiusheng, and the appointment of three state-backed executives as executive vice presidents.
The leadership reshuffle is a turning point, with Vanke now under deeper government oversight. Its largest shareholder Shenzhen Metro, which had maintained a hands-off approach, is now actively involved in Vanke’s management and debt restructuring.
Shenzhen Metro has already injected 7 billion yuan into Vanke through project acquisitions and shareholder loans. Analysts expect more state-backed liquidity support, but the scale of intervention needed to stabilize the developer’s finances is uncertain.
Since the third quarter of 2021, China’s property sector has been in decline, with numerous private developers collapsing under heavy debt. Vanke largely avoided the turmoil, but by early 2024 it faced crises on both operational and financial fronts.
Shenzhen’s state-owned assets regulator promised support, citing the city’s strong fiscal standing, with more than 5 trillion yuan in state-owned enterprise assets. Officials have also committed to reducing Shenzhen Metro’s debt burden and boosting its liquidity to sustain its role as Vanke’s top shareholder.
China’s state-owned banks have also expressed confidence in Vanke’s recovery, promising continued financial support through loans, bonds and asset-backed securities.
After the Lunar New Year holiday, Vanke moved swiftly to replace its executive team. On Feb. 5, it named 10 new senior managers, many with previous experience in Shenzhen’s state-owned firms or affiliated entities. That evening, the company issued an internal notice clarifying executive responsibilities, cementing Shenzhen state assets’ control over its daily operations.
For decades, Vanke operated as a decentralized company with no dominant shareholder, relying on professional managers rather than a single controlling entity. That structure made it vulnerable to external takeovers, however, such as the 2015-2017 battle for control involving Baoneng Group, China Resources and Evergrande.
In response, Vanke introduced a partner system that allowed senior management to invest in the company, aiming to align executives’ interests with long-term stability. However, recent financial pressures have raised scrutiny over these internal investment mechanisms, including asset-backed management products that allegedly involved excessive leverage.
As financial regulators examine these structures, Vanke’s leadership changes are reshaping its corporate culture. The entry of state-backed executives signals a shift toward tighter state control, potentially limiting the autonomy of Vanke managers.
Beyond governance changes, Vanke’s survival hinges on a recovery in sales. In 2024, its sales fell 34.6%, a steeper decline than the industry average of 28.1%. The company has struggled to replenish its land reserves in major cities, limiting its ability to capitalize on recent policy support for the property sector.
S&P analysts warn that Vanke’s reduced land acquisitions could weaken its sales outlook for 2025. While China’s central government has signaled support for the housing sector, homebuyer confidence remains weak, and competition is intensifying.
For now, Vanke is relying on government coordination to secure additional liquidity. Since January, financial authorities have been pressing Shenzhen to take a more active role in managing Vanke’s debt crisis. Shenzhen officials hired investment bank China International Capital Corp. to assess Vanke’s finances and devise a long-term restructuring plan.
The government’s intervention appears to be working, at least in the short term. in January and February, Vanke successfully repaid 6 billion yuan in maturing bonds and on Feb. 18 said it would meet its next bond repayment deadline on Feb. 25.
Several banking executives noted that banks have begun treating Vanke as a quasi-state-owned enterprise since the entry of state-backed management, increasing their willingness to extend loans.
A comprehensive rescue plan remains uncertain, however. Shenzhen government has not committed to an unlimited bailout, emphasizing support will be strategic rather than unconditional. Financial analysts suggest potential measures include debt restructuring, asset sales and new financing arrangements, but their effectiveness depends on market conditions.
Ultimately, Vanke’s fate will be determined by whether China’s property sector stabilizes. Policymakers have signaled their intent to prevent further deterioration, but recent measures have had limited impact on homebuyer sentiment.
Contact reporter Denise Jia (huijuanjia@caixin.com)
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