In Depth: Vanke’s Debt Spiral Reveals Limits of China’s Real Estate Backstop

1. In January 2025, China Vanke Co. Ltd., a major real estate company, narrowly avoided default by securing a last-minute extension on domestic bonds. This extension followed prolonged negotiations with creditors and represented a crucial moment for Vanke, which had historically been regarded as one of the most robust players in China's troubled property market. Concurrently, former Chairman Yu Liang, who led the company for over a decade, became unreachable following his formal retirement, fueling speculation that authorities may have detained him. [para. 1][para. 2]

2. Vanke’s challenges illustrate mounting liquidity pressures even among China’s most stable property developers. The company, supported for years by the Shenzhen government and state-owned Shenzhen Metro Group (27.18% ownership), became increasingly dependent on public-sector backing as its situation worsened in 2025. Although Shenzhen Metro and the Shenzhen government had provided more than 30 billion yuan ($4.3 billion) in liquidity, by 2025 their capacity was exhausted, forcing Vanke into strenuous negotiations with bondholders and ending its era of professional management. [para. 3]

3. Yu Liang, who had long warned of property market risks, envisioned a period of slower growth (“Silver Age”) and championed austerity, but ultimately failed to spare Vanke from a severe liquidity crisis. [para. 4]

4. Under founder Wang Shi, Vanke focused on disciplined residential property development. However, after Wang’s retreat from daily management, Yu Liang led an ambitious diversification. Between 2012 and 2017, Vanke broadened its portfolio, making significant investments: acquiring SCPG Co. Ltd. for 12.87 billion yuan in 2016, contributing S$3.4 billion ($2.5 billion) to purchase GLP Pte Ltd. in 2017, and buying 55.1 billion yuan worth of land from Guangdong International Trust and Investment Corp. Further, Vanke launched the “Ten Thousand Villages Plan,” transforming 100,000 village apartments into rentals in just one year. [para. 5][para. 6][para. 7]

5. This aggressive growth, intended as a defensive moat, left Vanke with escalating leverage: total interest-bearing debt climbed from 190.62 billion yuan (16.4% of assets) at the end of 2017, to 361.28 billion yuan (28.1% of assets) by 2024. As the property downturn worsened in China, Vanke debated asset sales for cash, but Yu hesitated to sell at low prices, missing the optimal timing for shedding non-core assets. [para. 8][para. 9]

6. In 2024, Vanke introduced an operational “slimming” plan, aiming to divest non-core businesses and accelerate asset sales. However, aggressive liquidation was deemed risky to the company’s long-term viability. Instead, Vanke shifted to collateralizing its assets and equity stakes to obtain loans and financing. [para. 10][para. 11]

7. By end-2023 and into early 2025, Vanke’s liquidity was nearly exhausted after repaying 29.2 billion yuan in bonds in 2024, with over 36 billion yuan in public debt due. Proposed solutions, including securing 36 billion yuan in syndicated loans through pledging subsidiary equity and restructuring 80 billion yuan of bank loans via asset transfers, failed as risk appetite among banks diminished. [para. 12][para. 13]

8. Shenzhen authorities, via Shenzhen Metro, then intervened, taking control of operations and providing 31.46 billion yuan in shareholder loans in 2025, helping Vanke pay 30.49 billion yuan in public debts. However, new agreements required Vanke to post collateral for up to 22 billion yuan in shareholder loans, signaling deteriorating credit conditions and increasing lenders’ demands for security. By late 2024, banks required collateral for all new lending, a stark shift for Vanke, which still had over 160 billion yuan in unsecured loans. [para. 14][para. 15][para. 16][para. 17]

9. The added financial strain on Shenzhen Metro raised sustainability concerns for continued support, especially as Vanke’s growing losses began to impact the parent group’s finances. Some infusions from Shenzhen Metro may themselves be bank-funded, undermining long-term support viability. [para. 18]

10. The situation reached a critical point in November 2025 when Vanke sought deferrals for bond repayments, leading to tense negotiations with creditors. By January 2026, bondholders agreed to new terms including partial down payments and additional credit enhancements, after initial offers were rejected. Shenzhen Metro injected another 2.36 billion yuan to help Vanke meet immediate obligations, but the company remains under heavy financial strain, facing 15 billion yuan in onshore bond maturities and $1.3 billion in offshore bonds by late 2026. [para. 19][para. 20][para. 21][para. 22]

11. While Vanke has indicated to creditors that it is not seeking judicial bankruptcy, the company’s ability to avoid a broader restructuring process remains uncertain. The future stability and solvency of one of China’s largest property developers hangs in the balance. [para. 23][para. 24]