China’s real estate giant Vanke has become the latest private developer to fall into a liquidity crisis, as reported on February 4, 2025. Following recent personnel changes, the representative of the largest shareholder, the state-owned China Resources Iron & Steel group, now occupies nearly half of Vanke’s senior management positions. Observers are alarmed by the alarming reversal in the Chinese real estate industry, with private enterprises being replaced by state-owned entities. Industry insiders reveal that Vanke’s current crisis stems from the pitfalls of mixed ownership involving state capital.
On January 27, Vanke announced that Chairman Yu Liang, CEO Zhu Jiusheng, and Board Secretary Zhu Xu all resigned from their positions. Meanwhile, the Chairman of its largest shareholder, the Shenzhen Metro Group (referred to as Shenzhen Metro), Xin Jie, will assume the position of Chairman of Vanke’s board.
Among the three who resigned, it was previously reported that Zhu Jiusheng was taken away for investigation by public security authorities and no longer holds any position at Vanke.
The Shenzhen Metro Group, representing a state-owned subway operator under the direct administration of Shenzhen’s State-owned Assets Supervision and Administration Commission, now occupies nearly half of Vanke’s senior management positions. The Shenzhen Metro Group is also set to acquire several projects from Vanke.
Vanke has recently fallen into a liquidity crisis, as indicated in its announcement last month stating an expected loss of 45 billion yuan (RMB) in 2024. According to data from JPMorgan Chase, Vanke has 33 billion yuan in bonds maturing this year.
During China’s economic boom, private real estate developers reshaped city skylines and generated immense wealth for their founders. However, in recent years, many of these companies have faced financial troubles, with giants like Evergrande, Country Garden, and Sunac China all encountering crises.
The Wall Street Journal reported on February 3 that as private and local developers find themselves in dire straits, the real estate industry is increasingly dominated by state-owned enterprises. This marks a remarkable transformation for an industry that has long been a model of China’s economic development.
Although Vanke is typically classified as a private enterprise, it maintains extensive ties with the Chinese Communist government. Founded as a state-owned enterprise in 1984, Vanke later became one of China’s first joint-stock companies and was among the first to be listed on the Shenzhen Stock Exchange in the 1990s.
On August 10, 2000, the state-owned Shenzhen Special Economic Zone Development Group transferred all of its state-owned legal person shares in Vanke to the central state-owned enterprise China Resources, making it Vanke’s largest shareholder. After a 2017 equity battle dubbed the “Baoneng Incident,” where the private Baoneng Group lost, the state-owned CR Iron & Steel Group became Vanke’s largest shareholder.
Vanke insists it has always been a mixed-ownership enterprise. Financial expert Jiang Bojing believes Vanke is a “state-owned capital-participating company,” a quasi state-controlled listed company.
On February 4, real estate blogger “Miss Wen” analyzed in a video that the root cause of Vanke’s current situation is the system “big tree” it relies on.
She explained that when China Resources increased its stake to become Vanke’s largest shareholder, it maintained a principle of non-interference and appointed two non-executive directors to safeguard the autonomy of Wang Shi and Yu Liang in decision-making. Leveraging China Resources Land’s commercial property experience, Vanke expanded significantly in five years with impressive profit-making ability, becoming a model for mixed-ownership companies. However, after Shenzhen Metro acquired stakes from China Resources and Evergrande in 2017 to become the largest shareholder, the State-owned Assets Supervision and Administration Commission of Shenzhen sought to explore a new combination of local state capital and market-oriented real estate companies. While this restructuring provided Vanke with improved resources and made it easier to secure Transit-Oriented Development projects, the speed of urban renewal increased significantly, and financing costs were lowered compared to the China Resources era. Nevertheless, their management structure underwent a profound change as Shenzhen Metro deployed three directors, occupying one-third of the board. This prolonged decision-making processes and increased project approval timelines, proving fatal for a company like Vanke that values efficiency.
The blogger stated that under Shenzhen Metro’s leadership, Vanke excessively focused on TOD projects, leading to poor sales of projects such as the roof-over metro project in Shenzhen Pingshan District. Vanke was also “forced” to undertake the Shenzhen Talent Apartment project, with a yield of only four percent but tying up three hundred billion yuan in capital. They missed the window for Shanghai land auctions in 2020, resulting in a significant reduction in land reserves that year. Furthermore, Vanke was even urged to participate in the construction of 5G base stations in Shenzhen, which were non-core investments that diverted attention from overall management. Additionally, Vanke’s pride in its co-investment system was hampered by state capital supervision, causing reduced profitability and loss of motivation among senior management, leading to a drain of key personnel.
“The greatness of the Vanke era lies in the people of Vanke. When waves of truly talented people leave, the Vanke we once knew ceases to exist. After around six months of Shenzhen Metro merging with Vanke, I interviewed many people from Vanke. They felt it was no longer the Vanke they knew,” she said.
The blogger stated that when the entire real estate market transitions from being an engine of economic growth to a target for risk mitigation, the large tree we rely on, with its system advantages of mixed ownership, can become an obstacle to our transformation. In the industry’s downturn cycle, this tree has become a burden for both Vanke and Shenzhen Metro in their transformations.
Vanke’s newly appointed Chairman of the Board, Xin Jie, stated that the new management team “is confident in achieving Vanke’s stability in personnel, finance, and operations. The company has already made arrangements for debt repayments in the first quarter of this year.”
The aforementioned real estate blogger expressed that the latest news claims Shenzhen Metro is fully supporting Vanke, but to what extent? Currently, they appear to be expressing support verbally, as the investment capacity of Shenzhen Metro itself is also subject to restrictions.
The blogger argues that mixed ownership presents a paradox, as the mixture of two different systems is imagined in the market as a consolidation where one plus one equals a hundred. However, the past three years have highlighted the difficulties in the integration process between these two distinct systems. The low risk tolerance of state capital shareholders limits Vanke’s ability to pursue radical self-rescue measures. Even on the matter of selling projects, they cannot reach a consensus.
Analyst Wang Jian previously stated in a video program that Shenzhen Metro itself is operating at a loss, so where would the funds come from to rescue Vanke from its debt crisis? He believes Vanke is likely to become the next Evergrande, turning into a zombie enterprise.
According to the Wall Street Journal, local governments typically are reluctant to shoulder the debts of troubled developers. The Chinese government’s primary focus seems to be ensuring the completion and delivery of pre-sold homes rather than providing comprehensive assistance to developers.
Data shows that by 2024, the Chinese real estate market had amassed as many as 90 million vacant homes. Furthermore, according to Nomura Securities’ Chief Economist Lu Ting, “China has around 20 million incomplete pre-sold homes.”
(Text continues beyond this point.)