Fitch: believe China Vanke's underperformance reflects difficulty in revitalising some of existing inventory and saleable resources

Fitch: believe China Vanke's underperformance reflects difficulty in revitalising some of existing inventory and saleable resources

China Vanke Co., Ltd., one of the largest real estate developers in China, reported a wider first-half loss of 12 billion yuan (S$2.1 billion) for the period ended June 30, 2025. This represents a significant increase from the 9.9 billion yuan loss recorded in the same period last year [1]. The company's ongoing struggles highlight the broader challenges faced by the Chinese property sector, despite government support.

The latest figures underscore the continued pressure on Vanke's bottom line, primarily due to declining home settlements and suppressed gross margins. The company's revenue declined by 26% to 105.3 billion yuan, while total cash slipped to 69.4 billion yuan. Vanke's unfinished residential inventory stood at approximately 257 billion yuan at the end of June [1].

The developer has received substantial financial backing from its largest state shareholder, Shenzhen Metro, which has offered multiple loans totaling about 23.9 billion yuan this year. However, these efforts have not been sufficient to alleviate the company's liquidity stress or improve its prospects [1]. The latest disclosure shows that Vanke still has about 364 billion yuan of interest-bearing borrowings as of June, with 43% of these due within the next 12 months [1].

Fitch Ratings has downgraded Vanke's long-term issuer default score by one notch to CCC+, indicating a possibility of default. The rating agency cited the company's worsening sales performance and the inability to revitalize existing inventory and saleable resources [1]. Vanke's largest maturity wall is in 2026, when about 24 billion yuan of onshore bonds and loans are due, further exacerbating its financial challenges [1].

Despite the setbacks, Vanke has been actively seeking to extend some of its domestic bank loans by as much as 10 years, which could provide temporary relief from its repayment obligations. However, the company's long-term prospects remain uncertain, and its ability to navigate the current market conditions will be critical for its survival [1].

References:
[1] https://www.businesstimes.com.sg/property/china-vankes-loss-widens-12-billion-yuan-despite-support
[2] https://finance.yahoo.com/quote/000002.SZ/