Another Chinese Builder Is Facing a Cash Crisis
China Vanke, one of China's largest property developers, said on Monday that its top executives were stepping down and warned of a $6.2 billion loss for 2024, the latest sign that China's grueling multiyear property downturn has not reached the bottom.
In a filing in Hong Kong, Vanke said that its chairman, Yu Liang, would leave his post for 'work adjustment reasons.' Zhu Jiusheng, the chief executive, would resign 'due to health reasons,' the company said.
The changes mark an effort by the local government to take greater control of the management of Vanke.
Vanke's new chairman will be Xin Jie, the head of its biggest shareholder, an entity owned by the government of Shenzhen, where the developer is based. Vanke will also get three new executives from state-owned firms, according to the company, which added that it was undergoing 'temporary liquidity difficulties.' Mr. Yu will stay on as an executive vice president.
In a separate filing, the company said it expected that it lost $6.2 billion last year, in part, because of plunging sales.
Financial experts have grown increasingly concerned about Vanke's financial problems in recent months after it reported a $2.5 billion quarterly loss in October and started to warn about its ability to repay creditors. Last week, S&P Global and Fitch, two ratings firms, downgraded their outlooks for the company, citing worries over its ability to generate cash to make its debt payments as its sales slowed dramatically.
Vanke has $5 billion worth of bonds coming due this year.
Across China, dozens of real estate companies have defaulted on ballooning debt. Millions of home buyers have been left without apartments that they had paid for. But many experts had anticipated that Vanke would be able to weather the worst of the storm, in part because its largest shareholder is state owned, giving it more public financing. It had been placed on a government list of 'high quality' developers that China's banks were encouraged to lend to.
The fact that Vanke is struggling to pay off it debts is another worrying sign for China's broader property market.
The series of announcements on Monday were the first time the company has said anything publicly since Chinese media reported this month that Mr. Zhu had been taken away by police and that local officials had been sent to take over the company. The report was taken down within hours of its publication.
Multibillion dollar losses, executive purges and state takeovers are no longer surprising developments in China's property sector. The country's biggest builders have collapsed under tens of billions of dollars of debt and the government is trying to come up with the resources to finish apartments.
Last week, Country Garden, another property giant that defaulted on $187 billion of debt in 2023, was given more time to negotiate a restructuring deal with its creditors in a Hong Kong court. One year ago, the same court ordered Evergrande, which defaulted on more than $300 billion of debt in 2021, to be liquidated.
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