China Vanke, a prominent Chinese property developer, announced a significant leadership shakeup on Monday, with Chairman Yu Liang and CEO Zhu Jiusheng stepping down. This news coincides with a projected net loss of $6.2 billion for 2024, raising concerns about the company’s liquidity.
Shenzhen Metro, Vanke’s largest state-owned shareholder, will install its chairman, Xin Jie, as Vanke’s new chairman. This move signals increased government oversight, anticipating potential intervention to mitigate non-repayment risks as Vanke faces upcoming debt maturities. Yu Liang will transition to the role of executive vice president, joined by three other executives from Shenzhen state-owned enterprises.
Earlier this month, a state media report, later retracted, suggested Vanke’s CEO was detained and the company might face a takeover or restructuring. Vanke has not addressed these rumors.
In an official statement, Vanke attributed the leadership changes to the need for enhanced management and leveraging the resources of Shenzhen Metro to address “temporary liquidity difficulties.” The company emphasized its commitment to core businesses and operational improvements to mitigate risks and protect stakeholders.
The projected 45 billion yuan ($6.2 billion) net loss for 2024, a stark contrast to the 12 billion yuan profit in 2023, stems from declining sales and profit margins, increased provisions for credit and inventory impairments, and losses in asset and equity transactions.
Vanke, a well-known developer with numerous projects in major Chinese cities, is approximately one-third owned by Shenzhen Metro. Previously considered resilient to the ongoing property market turmoil, Vanke’s struggles raise concerns about broader market confidence and potential financing restrictions for the sector.
The Shenzhen government, through Shenzhen Metro, possesses the resources to stabilize Vanke, according to the local state-asset regulator cited in the Nanfang Daily. Shenzhen housing authorities and banks have also pledged support through asset disposals and financing.
Analysts suggest that government intervention effectively nationalizes Vanke, reassuring creditors about the company’s repayment capabilities.
Reinforcing this support, Vanke announced a projected 600 million yuan ($82.75 million) profit from transferring its rights in a Shenzhen skyscraper project to Shenzhen Metro, solidifying the state-owned entity’s majority stake.
Yu Liang served as Vanke’s president from 2001 to 2018 and chairman since 2017. Zhu Jiusheng joined Vanke in 2012 and became CEO in 2018.
Earlier on Monday, Vanke’s bonds rallied after the company announced the early redemption of its 2027 notes, signaling confidence in meeting short-term obligations. This move was interpreted positively by investors, suggesting confidence in the company’s ability to manage its immediate financial commitments.
This leadership transition and the projected financial losses mark a significant turning point for China Vanke. The increased state involvement may provide stability but also raises questions about the future direction of one of China’s largest property developers. The company’s ability to navigate these challenges will be crucial for its long-term viability and could have broader implications for the Chinese real estate market.
