In China, the real estate market continues to face a prolonged winter, with industry leader Vanke, once hailed as the “star student” of real estate, now deeply mired in a debt quagmire. Its largest shareholder, Shenzhen Metro, has been injecting funds but struggles to halt the losses, reflecting the limits of state-owned enterprises’ support.
Experts warn that if Vanke defaults, it could not only shake market confidence but also trigger a nationwide financial chain reaction, becoming a new alarm for China’s property market crisis.
The Chinese real estate market has been in a long slump, and Vanke, once a symbol of China’s urbanization prosperity, is now facing its most severe financial crisis in its forty-year history.
According to the company’s third-quarter report for 2025 released on October 30th, operating income for the first three quarters was 161.39 billion Yuan, a 26.6% year-on-year decrease. The net loss attributable to shareholders of the listed company reached 28.02 billion Yuan, an 83% surge compared to the same period last year. In the third quarter alone, the net loss attributable to shareholders was 16.07 billion Yuan, almost surpassing the total for the first half of the year, indicating a continuous expansion of losses.
Vanke’s crisis stems from its long-term reliance on high leverage and debt expansion. As of the end of September 2025, the company’s total assets were 11.366 trillion Yuan, down by 11.64%; interest-bearing debts amounted to 362.93 billion Yuan, while cash funds stood at only 65.68 billion Yuan, resulting in a high asset-liability ratio of 73.5%.
The pre-tax gross profit margin for real estate development business was only 0.7%, with an after-tax gross profit margin of -10.5%, indicating that the main business operations were operating at a loss.
As a state-owned enterprise with a huge scale, Vanke’s debt default risk is particularly concerning. Sun Guoxiang, a professor from the Department of International Affairs and Business at Nanhua University in Taiwan, warned that Vanke faces multiple debts maturing in 2025, and without substantial external funding or asset liquidation, the risk of default and extensions is extremely high.
He cautioned, “Once Vanke officially defaults, the real estate market will further collapse, leading to a collapse in buyer confidence, nationwide panic, and unfinished projects. A more serious consequence would be the rapid deterioration of financial institution asset quality, bond market turmoil, local government fiscal damage, and an overall economic impact.”
American economist David Huang also pointed out that if a giant like Vanke triggers a significant default, it would redefine expectations for state-owned asset support. This could result in more challenges for private and local state-owned developers in terms of financing and operations.
However, behind Vanke, there has always been blood transfusion from local governments. Vanke recently announced that Shenzhen Metro Group has agreed to provide loans up to 22 billion Yuan in principal starting this year, no later than June 30 next year.
Shenzhen Metro Group is Vanke’s largest shareholder, holding 27.18% of the shares and has injected and loaned over 150 billion Yuan to Vanke since 2017. In 2025 alone, they provided eleven loans totaling 29.13 billion Yuan, with an interest rate of around 2.34%, well below the market average.
Shenzhen Metro Group is a large state-owned enterprise wholly owned by the Shenzhen State-owned Assets Supervision and Administration Commission.
Nonetheless, this blood transfusion has plunged Shenzhen Metro into a financial quagmire. In 2024, Shenzhen Metro reported a 33.5 billion Yuan loss, wiping out the accumulated profit of 27.3 billion Yuan over the previous five years.
Huang explained that while Shenzhen Metro has recently provided a 22 billion Yuan loan to “stabilize” the situation, this is only a short-term relief and does not offer a permanent solution.
He elaborated that Vanke faces a “triple squeeze”: a sharp decline in cash flow due to the slowdown in property sales, a heavy debt maturity pressure in 2025, and difficulties in asset disposal due to a sluggish market.
Huang added, “The current situation can be prolonged but not reversed. Without stable demand recovery and increased purchasing power, any financial policies aimed at prolonging the situation will result in higher costs and diminishing effects.”
Professor Sun Guoxiang from Nanhua University stated to Da Ji Yuan, “Shenzhen Metro and Vanke are both sinking together. Shenzhen Metro has provided low-interest loans at least 11 times this year, which merely delays the pressure but does not reverse the debt deterioration.”
He further pointed out that there is an intertwined structure in many parts of China involving state-owned enterprises, real estate companies, and local governments, with entities like China Resources, Poly, China Merchants Shekou, and Greenland. “The ultimate outcome often involves debt extensions, asset restructuring, or takeover of non-performing assets by state-owned asset management companies.”
Huang also highlighted that this phenomenon reflects the “resonance chain” between urban operation assets, metro systems, and real estate developers in China. “Shenzhen Metro, as a major shareholder, continuously provides liquidity support, but this is, in fact, eroding the financial flexibility of the public sector.”
He warned, “The debt expansion capacity of public finances has been exhausted. Short-term relief may come from subsidies, debt extensions, and asset restructuring, but in the long run, this is unsustainable.”
The Chinese real estate market is experiencing its fifth consecutive year of decline. A Standard & Poor’s (S&P) report in October predicted an 8% further drop in new home sales in 2025, with total sales not exceeding 9 trillion Yuan, nearly half of the 18.2 trillion Yuan in 2021.
A report from Goldman Sachs also indicated that the proportion of real estate investment in China’s GDP decreased from 7.8% in 2021 to 3.2% in 2025, hitting a historical low point. The overall market slump has dragged down the macroeconomy.
Professor Xie Tian from the School of Business at the University of South Carolina – Aiken, said in an interview with Da Ji Yuan that the root cause of Vanke’s debt trap lies in the entire real estate market’s operation of “borrowing for development, borrowing for home purchases, and lending to the privileged.” Such high leverage operations inevitably lead to the bursting of bubbles.
He candidly stated, “The current situation of Evergrande may well be the future of Vanke.” Evergrande was delisted from the Hong Kong Stock Exchange on August 25 this year, with its market value plummeting from nearly $50 billion in 2017 to less than $300 million, portraying a snapshot of the Chinese real estate bubble.
Xie pessimistically pointed out that the CCP “is likely unable to save it in the end,” and there will ultimately be a “bursting bubble, closure of real estate companies, and price declines,” restructuring the market in a way of “natural resolution.”
Financial expert Gao Tianyou, in an article for Hong Kong’s “Sing Tao Daily,” believes that the Shenzhen authorities are caught in a dilemma. On one hand, Vanke remains one of the largest real estate companies in the country with over 140,000 employees and construction projects covering 29.70 million square meters. If it collapses, it will trigger massive unemployment and a crisis of “unfinished buildings”. On the other hand, continued financial support implies an exacerbation of local public finance risks, which is akin to “pouring money into a bottomless pit”.
Huang analyzed that in the short term, the government is unlikely to directly make Shenzhen residents “foot the bill” because the political costs of raising fares or taxes are too high. “However, the government may indirectly transfer the pressure through means like asset securitization or local financing platform debt extensions.”
He pointed out that the state-owned enterprises supporting real estate companies through a “backstop model” are unsustainable. “The financial flexibility of the public sector is being eroded, ultimately leading to systemic debt risks.”
Sun Guoxiang added that the rumors of “Shenzhen Metro raising prices” reflect public sensitivity to the pressure on public finances. He believed that this is essentially the “taxpayers indirectly picking up the tab”.
Sun speculated that Vanke’s most likely future paths may be divided into two categories: some real estate companies go bankrupt and reorganize, such as Jinke and Huaxia Happiness; they rely on central or local “targeted aid” and state-owned asset management companies to acquire non-performing assets, but “the hope of overall recovery is slim.”
The current market consensus is that Vanke’s most probable scenario is to drag on through debt restructuring and asset sales. Huang pointed out that the first scenario with debt restructuring but avoiding a hard default, relying on tools like those provided by Shenzhen Metro for resuscitation, is the most likely outcome.
He believed that while default may be postponed, credit ratings will significantly drop, and stock prices will fluctuate drastically. He estimated that the optimistic scenario probability is less than 1%, while the worst-case scenario also has a 1% chance: external financing contraction, worsening sales, and shareholder blood transfusion becoming unsustainable, leading to default.
Sun Guoxiang stated that debt restructuring is a short-term feasible solution, but if there is no improvement in the fundamentals of the real estate market, there will still be a “delayed survival” with little hope of significant recovery. “Vanke’s crisis isn’t just an individual company problem but a legacy of China’s overall highly leveraged real estate model.”
Both Standard & Poor’s and Goldman Sachs reports suggest that the decline in the Chinese real estate market will exceed expectations, with 2026 marking the fifth consecutive year of descent.
Huang concluded, “Without demand recovery, increased purchasing power, and strengthened social security, any financial resuscitation efforts will only delay the inevitable.”