China steps up Vanke intervention as developer woes deepen
CHINESE officials are taking steps to stabilise operations at China Vanke after deepening liquidity stress and questions surrounding the whereabouts of its top executive triggered turmoil for its bonds and shares last week, according to sources familiar with the matter.
Officials of Shenzhen, the southern metropolis where Vanke is based, held a closed-door meeting to discuss Vanke on Friday (Jan 17), said the sources, asking not to be identified discussing a private matter. Vanke’s largest shareholder is a state firm controlled by the city, giving the local government tremendous sway over the developer.
The Shenzhen government said during the meeting it plans to ensure that Vanke’s operations remain stable, the sources added. The officials also plan to bring in new auditors and financial advisors to assess Vanke’s balance sheet and property projects to pave the way for next steps, according to the sources.
The discussions are preliminary and could be subject to change, the sources said.
Financial regulators and the local government of Shenzhen have already played a role in coordinating financing extension for Vanke in the past. A household name in China, Vanke had long been seen as insulated from a protracted property crisis because of its government link.
The company has been in the spotlight since the start of the year. It’s facing a wall of debt repayments just as its home sales tank and losses widen amid the unprecedented slowdown in the real estate market.
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Investors were thrown into disarray late Thursday over questions on the whereabouts of Vanke’s chief executive officer. A local media outlet Economic Observer reported that the top executive Zhu Jiusheng had been taken away by police, and the Shenzhen government sent a working group to intervene in Vanke as the developer may face takeover. A few hours later another publication said Zhu was reached and the Observer’s stories were removed on Friday.
The sources familiar did not have additional information on Zhu’s latest status. Vanke and the Shenzhen city government did not immediately respond to requests for comment.
“Vanke’s liquidity could reach breaking point in 2025 in the absence of a state rescue, given its weakest cash coverage of short-term debt since 2004,” Bloomberg analysts Kristy Hung and Monica Si wrote in a note on Monday.
The company’s cash coverage of short-term debt stands at 65 per cent and could fall further, they said, adding that its largest backer state-owned Shenzhen Metro Group’s liquidity remains similarly tight.
Once deemed as too big to fail, Vanke’s debt troubles show how even the highest quality developers have been ensnared by the property crisis, now in its fourth year. The downdraft is taking a toll on the closely watched builder, as the government’s efforts to stem the sector’s decline struggles to materially reinvigorate homebuyer demand.
Beijing has yet to signal its stance towards the developer. It’s also unclear what the government’s increased involvement means for the firm’s debt payments.
The developer has US$4.9 billion in yuan- and US dollar-denominated bonds maturing or facing redemption options in 2025, the highest annual amount of debt repayment ever and the most for any Chinese developer this year, Bloomberg data showed. Vanke said in early January that it will make all efforts to deal with its public debt obligations.
“Vanke is a household brand in China,” said Raymond Cheng, head of China property research at CGS International Securities Hong Kong. “It may not be that bad if the government could bail out Vanke.”
When Shenzhen’s State-owned Assets Supervision and Management Commission publicly expressed support for Vanke in late 2023, one of its senior official said Vanke was “an important member” in the city’s government-backed system, Bloomberg reported at the time. The city’s state asset supervisor has stayed silent over Vanke since then. BLOOMBERG
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