BEIJING – Almost five years into
a bruising property slump
that is nowhere close to recovery, China is facing yet another bout of jitters, this time brought about by Vanke, a state-linked developer long seen as one of the country’s safest bets.
Once one of China’s largest developers by sales, the Shenzhen-based Vanke rattled markets on Dec 1 when it asked for a 12-month delay on a two billion yuan (S$366.5 million) bond repayment due in mid-December and did not offer any upfront cash payment – a sign that the company is running low on cash. On Dec 5, it asked for an extension on a second note worth 3.7 billion yuan.
The moves by a company once held up as a bellwether of financial stability in the property sector triggered fresh anxiety across the industry that is already battered by years of default, unfinished homes and sinking prices.
And yet, despite the growing unease, analysts said Beijing appears unlikely to fully bail out Vanke, sparking market concerns that even major state-linked developers are now expected to absorb risks, and bucking expectations in some quarters of the industry that some big names might be offered a backstop.
Analysts say Beijing’s reluctance reflects a mix of tighter local government finances and a broader shift in policy priorities that increasingly tolerates volatility in the sector once seen as the backbone of China’s economy but which the country is transitioning away from.
Local governments’ debt burdens
have grown and they simply cannot afford “unreserved support”, as some had once said, even for state-linked builders.
“With local government finances under strain, their willingness to provide an unconditional backstop for distressed developers is running into limits,” said Ms Erica Tay, Maybank’s director of macro research.
Land sales revenues, once a lifeline for local budgets, have fallen nearly 60 per cent in 2025 from their 2021 peak, Ms Tay noted.
Even as revenues have fallen, local governments have had to increase spending sharply during the Covid-19 pandemic and had borrowed money to fund infrastructure projects, adding to their debt burden.
As Beijing tightened oversight of hidden local government debt, it has been pushed to diversify its revenue sources, such as consumption-related taxes and fees rather than the once-dominant land sales.
“Compared with five years ago, when local governments had a strong vested interest in propping up property demand, their financial health is now less tied to the real estate sector,” she added.
China’s prolonged property sector crisis has already triggered record defaults and a wave of liquidations or restructuring at major developers, including China Evergrande Group and Country Garden Holdings, which once ranked among the country’s biggest home builders.
Vanke is one of the last big Chinese developers to have avoided a default, but it has been struggling with severe liquidity pressures since 2024.
State-owned Shenzhen Metro Group, a rapid transit company and Vanke’s largest shareholder with a 27.2 per cent stake, has injected 314.6 billion yuan in liquidity support in 13 rounds since early 2023. The backing had been crucial in helping the cash-strapped developer stay current on its debt.
But in early November, Shenzhen Metro jolted markets when it asked Vanke to provide collateral or pledges for about 20 billion yuan of previously unsecured loans.
The apparent shift in stance shocked many observers, as some investors had earlier bet that Vanke would avoid the fate of private sector giants Evergrande and Country Garden, which defaulted with little help from Beijing or other government entities.
Some investors had assumed that Vanke is more likely to receive sustained support because of its state links, stronger track record and involvement in policy-based projects such as affordable rental housing.
Some analysts interpreted the move as Shenzhen Metro seeking to protect itself against potential losses by securing Vanke’s strongest assets as collateral, signalling that even state shareholders may now be drawing clearer boundaries around how much support they are willing to extend.
Ms Zerlina Zeng, head of Asia strategy at CreditSights Singapore, noted that recent management reshuffles at both Shenzhen Metro and Vanke may have contributed to a reassessment of how much support was still worthwhile.
“Maybe Shenzhen Metro just does not see the light at the end of the tunnel and it doesn’t want to keep pumping money into the black hole, as there are more maturities ahead. Vanke’s sales are just going down and the overall financial and property market is not doing well,” she said.
Vanke faces 13.4 billion yuan of bond maturities from December 2025 to mid-2026, starting with the twi billion yuan note for which it is now seeking a one-year extension.
The developer is expected to meet noteholders on Dec 10 to review the extension proposal. But at least three investors have signalled that they will oppose it, Bloomberg reported.
Bloomberg also reported that Vanke had earlier tried to secure a short-term bank loan to meet its December repayments, but at least two big local banks turned it down.
“I don’t think Vanke is asking for this extension to buy time so they can service the debt. What they’re doing now is basically saying to the market that they’re not going to pay that debt anymore, they’re going for the restructuring which will be long and painful,” said Ms Zeng.
Vanke’s sales have plunged 43 per cent in the first 10 months of 2025, marking the fifth consecutive year of contracting sales and the sharpest decline since the property crisis began in 2021.
Instead of providing fresh capital injections or a blanket rescue, analysts said Beijing is more likely to offer partial support to Vanke to stabilise market confidence and avoid disorderly fallout, but leave Vanke to resolve its financial problems.
Dr Chen Bo, senior research fellow at the East Asian Institute of the National University of Singapore, said Shenzhen Metro may help Vanke secure the extension it seeks but is unlikely to inject new funds, with any support now “very limited compared with before”.
“The idea of ‘too big to fail’ is now gone. Since
Evergrande’s collapse
, there is no reason to assume Vanke would definitely not fail,” said Dr Chen, who researches China’s economy.
He noted that China’s approach to handling the property crisis differs markedly from other countries.
“China will not fully rescue you at any cost just because you’re a big developer. It prefers a more conservative, delaying approach that lets the market slowly move towards a new equilibrium,” said Dr Chen.
In most market-oriented economies, including the US, a recessionary property cycle typically bottoms out in around five years, he noted.
“But for China’s market adjustment, because of government intervention, it has a much longer clearing process. So it’s taking longer than we originally expected, with still some distance to go before it hits bottom,” he said.
For instance, Beijing has guided the central bank to increase support for distressed developers and encouraged state firms to take over and complete struggling projects in a bid to prevent disorderly fallout which helps to contain shocks but prolongs the sector’s drag on growth.
Adding to the unease is the growing information vacuum.
Two of China’s leading private property data providers – China Real Estate Information Corp and China Index Academy – abruptly stopped publishing their usual monthly reports on the top 100 developers’ sales ranking for November, reportedly after regulators asked them to withhold the data temporarily.
Chinese social media platforms Xiaohongshu and Bilibili were also ordered around mid-November to crack down on posts deemed as “talking down” the housing market, fuelling concerns that the authorities are tightening control over negative real estate information.
Mr Yan Yuejin, deputy director of the Shanghai-based E-House Real Estate Research Institute, said that if Vanke’s situation worsens, it could dampen already fragile public sentiment after years of turmoil.
But the upside, he noted, is that after years of dealing with troubled developers, regulators and banks now have a clearer playbook for managing such situations and are better prepared to contain spillover risks than in earlier phases of the crisis, he said.
Even if Vanke eventually spirals into a default, analysts expect local governments to prioritise the completion of unfinished homes, as ensuring social stability remains Beijing’s top concern. Bondholders, however, will suffer as they may likely only recover a small fraction of their original investment.
But the broader market sentiment remains weak as some home buyers wait on the sidelines in the hope of lower prices. Others may prefer to buy second-hand homes, where prices have fallen more steeply, which further depresses new-home demand and prolongs the slump.
Economists have long suggested that deeper structural reforms to China’s hukou, or household registration, and land systems are needed to unlock demand.
Allowing the nearly 300 million rural migrant workers to settle and buy homes in cities, or letting urban residents buy properties in rural areas, would significantly expand the market. Such reforms, however, remain complex and politically sensitive.
For now, expectations are low.
All eyes will be on the upcoming
Central Economic Work Conference
in December, which typically focuses on macroeconomic priorities, for any signals of further support measures although few expect a sweeping rescue package.
Unlike in 2024, when Beijing pledged repeatedly to stabilise the property sector, recent top-level meetings have placed much greater emphasis on technology, innovation and security.
The communique of the Communist Party of China’s fourth plenary session in October, for instance, mentioned property only once but mentioned innovation and security multiple times.
With the government’s economic focus less on the property sector, it looks like Vanke may be left largely on its own to pull itself out of its financial hole.
E-House’s Mr Yan noted that Shenzhen Metro, as a state-owned company, relies on public resources to some degree. Vanke’s mounting losses have already dragged down the financials of Shenzhen Metro, which he said recorded a consolidated loss of 33.46 billion yuan in 2024.
This makes unlimited backing unrealistic as doing so “could trigger public criticism over using taxpayers’ money to cover corporate mismanagement”, he said.
“If Vanke can successfully restructure, it could still find itself in a leading position after the industry clears out. But if the transition lags, it may fall into a slow-bleed predicament.”