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 andShen Yong and Chen Yanqing,Shenzhen Special Zone Daily

China Vanke issued fiveannouncements related to its annual report forecast,changes in senior management andproject transfers at around5p.m.January27,indicatinga major turnaround for the company,which has been facing liquidity risks.

Reports indicate that the Shenzhen municipal government,Guangdong provincial government,and relevant national departmentsare paying close attention and actively supportingChinaVanke 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 of2023,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 January27shows that the companysuffered a net profit loss of approximately45billion yuanfor2024,which significantly expanded compared with the first three quarters of last year.

“A major reason forVanke'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 investmentsof 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 January27,Vanke held a board meeting to adjust andreplenishits 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 Gangas executive vice presidents,and Tian Junas board secretary.

Due to job adjustments,Zhu Xu resigned from thepostof board secretary,but remainsto work in the company.Additionally,due tohealthreasons,Zhu Jiusheng resignedfrom the posts ofdirector and president and CEOofVanke and no longer holds any position within the company.

Vanke's new management team retains veterans while also introducing new members.Most of them have rich experience in corporate management and capital operations,witha 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,ChinaVanke has focused on business restructuring and riskmitigation,achieving certain progress.The companycompleted the payment of all29.2billion yuan in domestic and overseas public debts and ABS,inked bulk transactions worth25.9billion yuan,revitalized existing assets to recover cash exceeding10billion yuan.It alsoadded15new development projects,paying6.237billion yuan for land use rights.Despite these efforts,Vanke still faces some liquidity challenges. 

Industry insiderssaythat in the context ofChina Vanke’sincreasing liquidity risks and operational pressure,the major shareholder's recommendation of management candidatesshows a sense of responsibility and care forthe 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 Grouphas total assets of nearly800billion yuan and outstanding financing capacity,with comprehensive credit lines from various financial institutions exceeding400billion yuan.In November2024,Shenzhen Metro Group registered a new batch ofcorporate bonds amounting to15billion yuan and issued4billion yuan in January this year.According to Shenzhen Metro Group,Shenzhen State-owned Assets Supervision and Administration Commissionwill further expand its capital base and enhance the group's overall financing capacity.Shenzhen Metro Group said thatalthoughChinaVanke faces liquidity difficulties,it still possesses many quality assets,and as a major shareholder,Shenzhen Metro Groupwill leverage its advantages to support the newly formed management team in coordinating resource elements and mobilizing various forces to promoteChinaVanke's sustained,healthy,and stable development.

In fact,Shenzhen Metro Group has assisted Vanke to mitigate risks in recent years.In2024,Shenzhen Metro Group subscribed to29.75%REITs of CICC-SCPG funds and acquired the land parcel of Vanke at Shenzhen Bay Super Headquarters Base.This time,Shenzhen Metro Group acquired49%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 supportChinaVanke's healthy development.

China Vanke’s regional division leadersexpressed 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 forChinaVanke and,like many otherChinaVanke 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 forChinaVanke.

Various parties offer support for Vanke's steady development

Amidst adjustment andstrengthening of Vanke’s management team,Guangdong and Shenzhen governments and related departments,financial institutionsexpressed full support to the companyinprudently addressingrisks,maintainingoverall stability inits financing scale,and aidingthe company's ongoing healthy development.

"As of the end of2024,the assets of state-owned enterprises in Shenzhenhadexceeded5trillion yuan,with annual revenue exceeding1trillion yuan.We have the capacity,strength,and sufficient'ammunition'to supportShenzhen Metro Groupin promotingChinaVanke'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 reduceShenzhen 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 ofChinaVanke'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 touse government special bonds to acquire idle land and purchase existing residential properties.The Shenzhen Municipal Housing and Urban-Rural Development Bureau said 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 inChinaVanke's future development during interviews,saying that they will continue to activelyusevarious financial tools such as loans,bonds,asset management,and trusts to meetChinaVanke's reasonable financing needs,ensuring the overall stability of its financing scale.At the same time,they will further strengthen support forChinaVanke'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 inChinaVanke's team,finance,and operations.The company has also made arrangements for debt repayment in the upcoming quarter.

Confidence to complete delivery of residential properties

In recent years,ChinaVanke's commercial housing delivery has made remarkable progress,with over180,000high-quality units delivered in2024.Thecompany’ssales area reached18.107million 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 home buyers arefullyprotected. 

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 receivedprestigious nationalawards,such as the“Guangsha Award.” 

Additionally,it has improved communityfacilitiesincluding commerce,transportation,and educationamenitiesin over50large-scale projects,with more than30,000new 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 companywillstrengthen 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 the general trendsof industry transformation,leveraging technological innovation to develop newqualityproductive forces and better embrace the new models of real estate development."