China Vanke Warns of $6.2B Loss, Elevates Role of Shenzhen Metro Boss as CEO Exits

China Vanke on Monday warned of an attributable net loss of RMB 45 billion ($6.2 billion) for 2024 and announced the resignation and departure of president and CEO Zhu Jiusheng, whose reported arrest earlier this month had signalled a change of direction at the struggling developer.

Longtime chairman Yu Liang also resigned his post but will continue to serve as an executive director on the company’s board, Vanke said in a filing with the Hong Kong stock exchange. Succeeding Yu with immediate effect is Xin Jie, chairman of state-owned subway operator Shenzhen Metro, Vanke’s biggest shareholder.

While Vanke described Zhu’s exit as being due to health reasons and termed Yu’s shift a “work adjustment”, the company made note of its forecast loss and liquidity difficulties and said the board had resolved to strengthen the group’s management capabilities and leverage the resource advantages of Shenzhen Metro.

“The company deeply apologises for the performance loss and will make every effort to promote business improvement,” Vanke said in its profit alert.

Engineering a Turnaround

Xin has served as chairman of Shenzhen Metro since 2017 and has sat on the Vanke board since 2020. From 2009 to 2017 he was chairman of state-backed construction and engineering group Shenzhen Tagen.

As part of the management shake-up, Yu and Shenzhen Tagen director Li Feng have been appointed as executive vice presidents of Vanke, as have Shenzhen Metro veterans Hua Cui and Li Gang.

Secretary to the board and company secretary Zhu Xu also resigned to take a new role in Vanke’s long-term rental apartment business, to be succeeded by Tian Jun, a director at Shenzhen State-owned Duty-Free Commodities, Shenzhen Investment Holdings and Shenzhen Innovation Investment Group.

Now-former CEO Zhu was reportedly detained by public security authorities on 15 January, with subsequent media accounts pointing to a stepped-up role for Shenzhen government officials at China’s fourth-largest builder by sales.

Zhu took over as president and CEO in early 2018 from chairman Yu, who had performed all three roles after Vanke founder Wang Shi stepped down in June 2017. Zhu’s apparent arrest this month recalled prior episodes at bankrupt builder China Evergrande, whose founder and chairman Xu Jiayin disappeared from public view in 2023 after reportedly being held by authorities that September on suspicion of “illegal crimes”.

Red Ink Rising

Vanke’s likely loss of RMB 45 billion reverses a profit of RMB 12.2 billion in 2023, deepening concerns after Fitch Ratings last week further downgraded some of the developer’s bonds into junk territory.

“The downgrade reflects a deterioration in China Vanke’s sales and cash generation, which is eroding its liquidity buffer against large capital market debt maturities in 2025,” Fitch said in a ratings action note.

The Shenzhen-based builder’s December contracted sales totalled RMB 23.3 billion, down 29 percent year-on-year, bringing the full-year total to RMB 246 billion, down 35 percent.

The worsening financial situation may have prompted state authorities to step in, with Bloomberg reporting last month that China’s banking regulator had asked the nation’s insurers to report their financial exposure to Vanke, seeking to gauge how much support the developer needs to avoid default.

Vanke’s bonds rose Monday after the company said it would redeem 2027 onshore notes worth RMB 1 billion in March of this year.