Multiple parties actively support Vanke’s development, major turnaround on the horizon Shenzhen State-Owned Assets: Sufficient "ammunition" to support Vanke

ByFeng Shanshu, Southern Daily and Shen Yong and Chen Yanqing, Shenzhen Special Zone Daily

China Vanke issued five announcementsrelated to its annual report forecast, changes in senior managementandproject transfersataround 5 p.m. January 27, indicating a major turnaroundfor the company, which has been facing liquidity risks.

Reports indicate that the Shenzhen municipal government, Guangdong provincial government, and relevant national departments are paying close attention and actively supporting China Vanke in stabilizing its production and operations, lawfully safeguarding the legitimate rights and interests of homebuyers, creditors, and investors.

Multiple factors lead to huge losses last year

Since the liquidity risk emerged at the end of 2023, China Vanke has actively engaged in self-rescue with support from various parties, but it has not yet to completely resolve the risks. The performance forecast released January 27 shows that the company suffered a net profit loss of approximately 45 billion yuan for 2024, which significantly expanded compared with the first three quarters of last year.

“A major reason for Vanke's large losses is market-related, but management factors also play a role,” said a research director at a real estate think tank. "The company needs to make provisions for inventory writedowns on certain projects. There are difficulties in recovering some receivables, requiring provisions for credit impairment losses.Financial investments of its non-primary businesshave also incurred certain losses and the prices of some bulk asset transactions and equity transactions are below their book value."

Meanwhile, on the afternoon of January 27, Vanke held a board meeting to adjust and replenish its management team. During the meeting, Xin Jie was elected as the chairman of the board. Due to job adjustments, Yu Liang resigned from his position as chairman of Vanke's board, but retains the position as director of the board.

The board decided to appoint Yu Liang,Li Feng, Hua Cuiand Li Gang as executive vice presidents, and Tian Junas board secretary.

Due to job adjustments, Zhu Xu resigned from the post of board secretary,but remainsto work in the company. Additionally, due to health reasons, Zhu Jiusheng resigned from the posts of director and presidentand CEOofVanke and no longer holds any position within the company.

Vanke's new management teamretains veterans while also introducing new members. Most of them have rich experience in corporate management and capital operations, with a more diverse professional background. The newly appointed chairman Xin Jie previously served as the vice chairman of Vanke’s board and has held chairman positions in several state-owned enterprises, with work experience in multiple fields, including real estate, commerce, hotels, and construction.

Major shareholder acts decisively according to market-oriented and legal principles

In the past year, China Vanke has focused on business restructuring and risk mitigation, achieving certain progress. The company completed the payment of all 29.2 billion yuan in domestic and overseas public debts and ABS,inked bulk transactions worth 25.9 billion yuan,revitalized existing assets to recover cash exceeding 10 billion yuan. It also added 15 new development projects, paying 6.237 billion yuan for land use rights. Despite these efforts, Vanke still faces some liquidity challenges.

Industry insiders saythat in the context of China Vanke’s increasing liquidity risks and operational pressure, the major shareholder's recommendation of management candidates shows a sense of responsibility and care for the company's development, which aligns with common practices in a market-oriented and legal framework.

As a major supplier for the construction and operation of Shenzhen's rail transit,Shenzhen Metro Group has total assets of nearly 800 billion yuan and outstanding financing capacity, with comprehensive credit lines from various financial institutions exceeding 400 billion yuan.In November 2024, Shenzhen Metro Group registered a new batch of corporate bonds amounting to 15 billion yuan and issued 4 billion yuan in January this year. According to Shenzhen Metro Group, Shenzhen State-owned Assets Supervision and Administration Commission will further expand its capital base and enhance the group's overall financing capacity. Shenzhen Metro Group said that although China Vanke faces liquidity difficulties, it still possesses many quality assets, and as a major shareholder,Shenzhen Metro Group will leverage its advantages to support the newly formed management team in coordinating resource elements and mobilizing various forces to promote China Vanke's sustained, healthy, and stable development.

In fact, Shenzhen Metro Group has assisted Vanke to mitigate risks in recent years. In 2024, Shenzhen Metro Group subscribed to 29.75% REITs of CICC-SCPG funds and acquired the land parcel of Vanke at Shenzhen Bay Super Headquarters Base. This time, Shenzhen Metro Group acquired 49% of the investment income right of the property development project at Mangrove Bay and injected liquidity into China Vanke,demonstrating the major shareholder's unwavering commitment and attitude to support China Vanke's healthy development.

China Vanke’s regional division leaders expressed optimism about the decisive action taken by the major shareholder.Yi Ping'an, chief partner and general manager of the Central China Regional Management Department, and Li Wei, chief partner and general manager of the Southwest Regional Management Department, said that they have a deep affection for China Vanke and, like many other China Vanke employees, sincerely hope to see the company on a path of healthy development. The involvement of the major shareholder greatly boosts the team's morale to overcome challenges, and they believe the major shareholder can bring about positive changes for China Vanke.

Various parties offer support for Vanke's steady development

Amidst adjustment and strengthening of Vanke’s management team, Guangdong and Shenzhen governments and related departments, financial institutions expressed full support to the company in prudently addressingrisks, maintainingoverall stability in its financing scale, and aidingthe company's ongoing healthy development.

"As of the end of 2024, the assets of state-owned enterprises in Shenzhen had exceeded5 trillion yuan, with annual revenue exceeding 1 trillion yuan. We have the capacity, strength, and sufficient 'ammunition' to support Shenzhen Metro Groupin promoting China Vanke's robust development through all possible market-oriented and legal means,"said the head of Shenzhen State-owned Assets Supervision and Administration Commission. Additionally, Shenzhen will coordinate assets, funds, and resources, and will continually and gradually reduce Shenzhen Metro Group's asset-liability ratio through direct capital injections, asset allocations, and other methods to enhance liquidity, thereby better supporting it in playing the role of China Vanke's largest shareholder.

According to the official in charge of the Shenzhen Municipal Housing and Urban-Rural Development Bureau, relevant national ministries and commissions are actively implementing policies to use government special bonds to acquire idle land and purchase existing residential properties. The Shenzhen Municipal Housing and Urban-Rural Development Bureausaid it will vigorously coordinate relevant parties to properly handle the idle land stock of China Vanke, helping it to revitalize assets and recover funds. The Department of Housing and Urban-Rural Development of Guangdong stated that it will continue to guide city governments to intensify coordination efforts, encourage more real estate projects of enterprises to be included in the "whitelist," and persistently work to stabilize and reverse the decline in the real estate market.

Eight state-owned banks and joint-stock banks in Shenzhen allexpressed confidence in China Vanke's future development during interviews, saying that they will continue to actively usevarious financial tools such as loans, bonds, asset management, and trusts to meet China Vanke's reasonable financing needs, ensuring the overall stability of its financing scale. At the same time, they will further strengthen support for China Vanke's major shareholders to jointly help Vanke enhance liquidity and achieve stable operations.

The newly appointed chairman of the board, Xin Jie, saidthat with strong support from various parties and major shareholders, the new management team will actively implement a comprehensive plan and is confident in achieving stability in China Vanke's team, finance, and operations. The company has also made arrangements for debt repayment in the upcoming quarter.

Confidence to complete delivery ofresidential properties

In recent years, China Vanke's commercial housing delivery has made remarkable progress, with over 180,000 high-quality units delivered in 2024.The company’s sales area reached 18.107 million square meters, ranking first in the industry.

Vanke's financial officer said that the company currently has sufficient funds in its nationwide pre-sale fund supervision accounts, and the city real estate financing coordination mechanism (the whitelist) has fully covered relevant projects to provide credit support, which can meet this year's funding needs for commercial housing construction, ensuring that the rights and interests of homebuyers are fullyprotected.

For Vanke, delivering commercial housing not only means timely completion but also focuses on high-quality “good houses.” Over the past year, many of Vanke’s projects have received prestigious national awards, such as the “Guangsha Award.”

Additionally, it has improved community facilitiesincluding commerce, transportation, and education amenitiesin over 50 large-scale projects, with more than 30,000 new households moving in. In recent years, the government has proposed accelerating the establishment of a new model for real estate development, which has given the direction to housing enterprises, including Vanke.

The head of China Vanke said the company will strengthen efforts to dispose of non-core assets, expedite the exit from non-main businesses, and focus on its core operations to streamline and enhance efficiency. Meanwhile, it will actively seize thegeneral trendsof industry transformation, leveraging technological innovation to develop new quality productive forces and better embrace the new models of real estate development."