China Vanke posts US$2.2 billion loss as debt pressure mounts

[SHENZHEN] China Vanke’s losses deepened to 14.95 billion yuan (US$2.2 billion) in the first half, highlighting the challenges facing the distressed developer’s new board ahead of a wall of maturing debt. 

The total was close to the upper range of the firm’s forecast and compares with a net loss of 11.95 billion yuan a year earlier. It brings the company’s combined losses since 2024 to 153 billion yuan. 

Vanke, which has nearly a trillion yuan of assets, is one of the few Chinese developers to have avoided defaulting on their debt during the nation’s prolonged real estate slump. But persistent losses have strained liquidity and equity, adding to pressures when onshore bond payments start coming due in December. 

The results reflect “unrelenting liquidity pressure despite the extension of 10 public bonds”, Bloomberg Intelligence analysts Kristy Hung and Patrick Wong wrote in a note before the results. “Its prolonged cash crunch would threaten further debt extensions.”

Stock investors have backed away from Vanke, sending the company’s Hong Kong-traded shares near a record low since it listed in the city more than a decade ago.

On the mainland, Vanke’s stock is trading around its lowest level in more than two decades.

“Current operations remain very challenging,” Vanke said in the filing. “Available working capital is relatively tight.” Vanke added that it plans to keep accelerating sales, collecting receivables and exiting non-core businesses in an orderly manner. 

Governance overhaul

The embattled developer elected a new board in July, with authorities in its hometown of Shenzhen taking full control. 

Xu Enli, who was chosen as chairman, worked in state-owned firms in Shenzhen for nearly two decades before joining Vanke in July.

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Since joining Shenzhen state developer and investor Shumyip Group in 2008, Xu worked his way up to deputy general manager in 2020.

In late 2024, Xu took the chairman role at a state expressway operator in the city. 

Xu’s appointment came weeks after Vanke appointed a former municipal finance official as its new president. Huang Yu served as a deputy head of the Shenzhen Municipal Financial Regulatory Bureau, the finance watchdog of the southern city where Vanke is based. 

The abrupt overhaul came after Vanke elected six non-independent directors for its board, who all come from various Shenzhen state-owned firms. They include Huang Liping and Lei Jiangsong, chairman and deputy general manager of Vanke’s state backer Shenzhen Metro Group, which holds about 27 per cent of the developer. 

State support

The builder has been wrestling with a liquidity crunch for more than two years, and has leaned heavily on shareholder loans from Shenzhen Metro. That support waned late last year, although a sweetened loan term in May showed the rail operator hasn’t abandoned the developer. 

Shenzhen Metro has lent billions of yuan to Vanke, despite its mounting losses. It offered more than 30 billion yuan in loans last year, helping Vanke repay public debt, according to Bloomberg calculations based on corporate disclosures.

It lent another 4.5 billion yuan year to date, according to the H1 report published on Thursday (Aug 27), enabling the developer to make upfront payments to extend its yuan bonds. 

The relief has helped drive Vanke’s dollar notes to their highest level in nine months.

Its 3.975 per cent dollar bond traded at about 55 cents on the US dollar as of Thursday, according to Bloomberg-compiled data.

The company’s 3.5 per cent dollar note was at about 51 cents.

Still, such support will face a test in mid-December, when its extended 3 per cent yuan bond matures after originally coming due late last year. It remains unclear whether Shenzhen Metro will offer any further assistance to help address the builder’s upcoming bond maturities.

Vanke will formulate “repayment plans, including debt extensions”, for public bonds maturing between August and June next year, it said in the filing. BLOOMBERG