China’s real estate giant Vanke is facing a severe financial crisis, with the decision-making layer undergoing a major shakeup by the state-owned major shareholder. Vanke’s founder, Wang Shi, who has been retired for many years, recently released a long statement stating that he will not shirk responsibility and is trying to establish contact with the current decision-making layer of Vanke in hopes of doing everything he can for the company’s “smooth transition.” Insiders in the industry previously indicated that it was the state-owned system that caused trouble for Vanke.
According to an announcement on May 21st, Vanke will use Wanwu Cloud stocks worth no more than 6 billion yuan to replace the credit-enhancing measures of 4.2 billion yuan loan provided by the major shareholder, Shenzhen Metro Group, in February this year. This means that Vanke has pledged approximately 10 billion yuan worth of Wanwu Cloud shares to Shenzhen Metro Group, accounting for about 44.5% of the total share capital of Wanwu Cloud, raising concerns in the market about Vanke’s asset liquidity and debt repayment ability.
Since the beginning of this year, Shenzhen Metro Group has provided a total of four loans to Vanke, with a total amount reaching 11.852 billion yuan.
By the end of 2024, Shenzhen Metro Group’s total debt amounted to a staggering 444.788 billion yuan. This state-owned enterprise, once known as the “most profitable metro company,” is now in unprecedented hardship due to Vanke’s debt crisis.
The 74-year-old founder of Vanke, Wang Shi, posted on his social media on May 27th, stating that he is trying to establish smooth communication with the decision-making layer of Vanke for the “smooth transition” of Vanke and for the well-being of the vast investors, Vanke’s partners, and its 130,000 employees.
In the article, Wang Shi mentioned that when Vanke was created in 1983 in Shenzhen Special Economic Zone, it was established without any government investment or loan guarantees during the transformation into a shareholding system in 1988. The assets accumulated in the first four years of its establishment were priced at 12 million yuan, and the 12 million shares were divided so that 60% belonged to the state and 40% to the entrepreneurs approved by the government.
He also stated that after the establishment of Vanke as a company, the annual dividends were mainly used to purchase new stocks, and the remaining funds were used to compensate and assist the registered employees during the share reform in 1988, emphasizing that he has never taken a penny from the dividend of the company’s stock.
Wang Shi asked rhetorically, “How can I shirk the responsibility I owe to Vanke, a company I established, a system I built, a team I cultivated, and a successor I chose?”
Wang Shi is known as the “soul figure of Vanke.” In 2015, the “Baowang dispute” occurred, leading to Huarun’s withdrawal, Baoneng’s defeat, and Shenzhen Metro Group’s entry as the major shareholder of Vanke. On June 21, 2017, Wang Shi, aged 66 at the time, announced his retirement, and the position of Vanke’s chairman was succeeded by Yu Liang.
In 2024, Vanke’s net profit attributable to shareholders was a loss exceeding 49 billion yuan. According to a report by CRIC, as of the end of 2024, Vanke’s interest-bearing debt totaled 361.28 billion yuan, up by 12.9% compared to the beginning of the year. Its short-term debt size was at 158.28 billion yuan, accounting for 43.8%, and Vanke is expected to face a debt repayment peak in 2025.
Throughout this year, Vanke has faced multiple debt default crises due to cash flow shortages. Vanke’s decision-making powers have been taken over by the Shenzhen State-owned Assets Supervision and Administration Commission, leading to a major change in the top management of Vanke, with individuals appointed by the Shenzhen State-owned Assets Supervision and Administration Commission taking over as heads of multiple core departments of Vanke. Yu Liang resigned as the chairman of Vanke’s board in January this year, marking the official entry of Vanke’s internal management into the “state-owned asset-controlled era.”
According to Chinese media outlet “Caijing,” due to the changes in the top management of Vanke, Shenzhen Metro Group has dispatched several high-ranking executives to the management team, with Xin Jie, the chairman of Shenzhen Metro Group, replacing Yu Liang’s successor as the chairman of Vanke’s board. Therefore, Wang Shi expressed the need to “establish contact with the decision-making layer of Vanke.”
Although Vanke is generally classified as a private enterprise, it has intricate connections with the Chinese Communist Party government, being controlled by state-owned assets. Founded in 1984 as a state-owned enterprise, it later became one of China’s first joint-stock companies. State-owned enterprise Huarun became Vanke’s largest shareholder, followed by state-owned enterprise Shenzhen Metro Group becoming Vanke’s largest shareholder.
Chinese real estate blogger “Miss Wen” once analyzed in a video that the main culprit behind Vanke’s current situation is the system “big tree” it relied on.
She explained that when Huarun increased its stake to become Vanke’s largest shareholder, the board sent two non-executive directors to ensure Wang Shi and Yu Liang’s autonomous decision-making. Leveraging Huarun’s commercial real estate experience, Vanke expanded significantly within five years and demonstrated extraordinary profit-making capabilities. However, in 2017, after Shenzhen Metro became the largest shareholder, the Shenzhen State-owned Assets Supervision and Administration Commission utilized its control over Vanke through Shenzhen Metro’s acquisition. While making it easier for Vanke to undertake TOD (transit-oriented development) projects with lower financing costs, the management structure underwent a significant change. Shenzhen Metro dispatched three directors to the board, accounting for one-third of the directors, which extended the decision-making process and increased project approval cycles. This change proved fatal to a company like Vanke, which values efficiency.
The blogger stated that under Shenzhen Metro’s direction, Vanke excessively focused on TOD projects, resulting in poor sales for the Ping Shan subway overbuild project in Shenzhen. Vanke was also “forced” to take on the Shenzhen Talent Apartment project, which had a yield of only four points but tied up 30 billion yuan of funds. They also missed the 2020 Shanghai land auction opportunity, with a significant decrease in new land reserves that year. Furthermore, Vanke was required to participate in Shenzhen’s 5G base station construction, diverting investments away from its core business and dispersing the energies of the management team. Additionally, Vanke’s proud co-investment system was restricted by state-owned asset oversight, impacting its profitability and causing a loss of motivation among the management, thereby resulting in key staff turnover.
“Vanke’s strength lies in its people during the Vanke era, and after various waves of talented individuals left, the once formidable Vanke as we knew it no longer exists. Around half a year after Shenzhen Metro integrated into Vanke, I conducted interviews with many Vanke employees, and they felt that it was no longer the Vanke they had known,” she said.