Vanke’s state support was seen as solid enough to prevent the company from falling into financial trouble like dozens of its rivals since a liquidity crisis hit China’s real estate sector in 2021.
A debt restructuring by Vanke – a household name with many projects in China’s largest cities – could have an even greater impact in an already vulnerable market than the defaults of private Evergrande and Country Garden.
Renewed concerns about the outlook for the real estate sector come as a trade war with the US and weak domestic demand heighten risks to growth and pressure on policymakers to revive the $19 trillion export-driven economy.
Prices for new homes in China fell at the fastest monthly pace in a year in October, official data showed on November 14, highlighting continued weak demand in the property sector and reinforcing the need for further policy support. The company’s yuan bond due March 2027 fell to 40 per 100 face value on Thursday – far below the 85 it had been trading at on Monday. The Shenzhen Stock Exchange has suspended trading in seven of its exchange-traded bonds. Vanke’s Hong Kong-listed shares fell to a record low, while Shenzhen-listed shares fell to their lowest level since 2008.’NEW FINANCING’
Vanke, which has a total of 364.3 billion yuan in interest-bearing liabilities, said on Wednesday it was seeking approval from bondholders to delay repayment of a 2 billion yuan ($280 million) onshore bond due Dec. 15.
“It is difficult to assess whether the Vanke government will continue to provide financing support,” UBS real estate analysts led by John Lam said in a client note, adding that they saw a spillover risk to the sector.
That could mean other developers will have more difficulty securing refinancing loans and potentially trigger accelerated selling pressure in the housing market, they said.
Offshore, a Vanke dollar bond due November 2027 fell to 23.1 cents on the dollar on Thursday, compared with around 40 cents on Wednesday, data from Duration Finance showed. The bond was bid for about 55.4 cents on Tuesday.
JPMorgan analysts said almost all Chinese developers who requested extensions on bond repayments over the past four years ultimately defaulted and faced restructuring.
“Once a negative credit event occurs, these distressed developers will find it very difficult to obtain new financing,” they say in a research report.
“Vanke will likely follow a similar path,” and “its survival depends solely on Shenzhen Metro’s continued liquidity support,” she added.
State-owned Shenzhen Metro Group is Vanke’s largest shareholder with a stake of about 30%. This month the country agreed to provide loans of up to 22 billion yuan in 2025 and the first half of 2026, an exchange filing showed.
Financial publication Octus reported on Tuesday that Beijing has issued preliminary guidance to the government of Shenzhen, where Vanke is based, to consider a “market-oriented approach” to dealing with the developer’s debt.
The expression is a euphemism for restructuring, according to the Octus report.
Two people with knowledge of the situation said on Wednesday that state-owned China International Capital Corporation (CICC) had been called in to assess Vanke’s debt and that debt restructuring was among the options put forward by the investment bank in an internal report to the central government.
Vanke, CICC, the Shenzhen government and China’s State Council did not respond to requests for comment.
Vanke’s proposed maturity extension of domestic bonds highlights increased refinancing risks, said Daniel Zhou, an analyst at Moody’s Ratings.
“Additionally, China Vanke’s credit stress will heighten investors’ concerns about developers with weak financial profiles and further undermine their already limited access to financing.”
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