Octus on Credit: China’s Government Puts Floor Under Property Sector With Vanke ‘Nationalization’

Stephen Aldred, Managing Editor, APAC

Government intervention in one of China’s best known real estate developers, China Vanke, has sent a strong signal to markets that the government is finally drawing a line to prevent further deterioration in the sector.

The intervention was styled as increased support – including through capital injections – from the company’s major state-owned shareholder Shenzhen Metro, rather than a nationalization.

Vanke announced on Jan. 27 that it expected to book a substantial loss equivalent to $6.2 billion for 2024. At the same time, its CEO and Chairman both resigned, and the chairman of Shenzhen Metro stepped into the role of chairman, announcing immediately that the company had arranged funding to cover debt repayments due in the first quarter.

Vanke is among the top names in China real estate, with projects across many larger cities, and has a mixed public-private ownership model. Previously considered immune to the turmoil in the property sector, Vanke’s collapse would have far-reaching consequences, including further dampening consumer demand, and reducing bank support to the sector, which would have threatened other developers.

Perhaps most significantly, a default from Vanke would have jeopardized recent efforts from the country’s top leadership to stabilize the property market. Governments at both national and local levels have churned out easing measures in recent months, including cuts in mortgage rates and down payments, tax cuts, and a slew of walk backs from previous purchase restrictions.

The Vanke intervention signals that those measures will be protected. 

In protecting its policy measures, the government has directly intervened to support a developer. And it is that intervention, rather than a myriad of easing measures, that may finally put a floor under China’s property market.  

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