Vanke’s $6.8 Billion Annual Loss: A Reflection of China’s Struggling Property Market

Vanke’s Significant Losses and Revenue Drop

On Monday, Hong Kong-listed property giant Vanke reported a substantial annual loss of 49.5 billion yuan ($6.8 billion). This loss can be attributed to declining sales and narrowing profit margins, despite Beijing’s attempts to revive the ailing housing market.

Overextension and Aggressive Investment

• Vanke admitted it failed to break free from high-debt, high-turnover, and high-leverage expansion inertia in a timely manner.
• This overextension led to aggressive investment and over-expansion, contributing to the company’s significant losses.

Vanke’s loss, which exceeded its initial January estimate of $6.2 billion, marks its first annual loss since its 1991 listing. Revenue also dropped by 26% year-on-year to $47.3 million.

Executive Reshuffling

• Vanke’s Chief Operating Officer and Executive Vice President, Liu Xiao, resigned on Monday due to “work adjustments.”
• Liu will continue to work with the company, focusing on strategic investment business.

The shakeup follows the resignation of Vanke’s CEO, Zhu Jiusheng, in January due to health reasons. Reports from Chinese outlets suggested Zhu had been “taken away by public security authorities,” though the nature of the alleged offenses was unclear.

Beijing’s Efforts to Stabilize the Property Sector

• Despite Beijing’s efforts to stabilize the property sector, including a policy package announced in November to lower deed tax rates in major cities like Beijing and Shanghai, Vanke faced a net loss of $4.35 billion in the final quarter of 2024.
• The company warned of intensified liquidity pressure due to concentrated repayment obligations on its public debts this year.
• Chinese authorities are reportedly considering plans to help Vanke plug a $6.8 billion funding gap this year.

Other Chinese Developers Face Losses

• Vanke is not alone in facing financial troubles. Kaisa, another troubled developer, reported a 48.4% increase in losses to $4.03 billion for 2024.
• Country Garden also reported a $4.5 billion annual loss, with total debt reaching $34.9 billion at the end of 2024.

Vanke’s struggles are part of a broader crisis in China’s real estate sector, which has been grappling with a massive debt burden and severe financial distress for many developers.