China Vanke Loss Widened in H1 as Sales Sank 52%

China Vanke this past week warned of an attributable net loss of RMB 10 billion to RMB 12 billion ($1.4 billion to $1.7 billion) for the first six months of 2025, widening from an RMB 9.85 billion loss for the same period last year, as the development giant struggles to reassure potential homebuyers about its future.

Sales revenue of the Shenzhen-based builder in the first half was RMB 69.1 billion, according to a filing to the Hong Kong exchange, with that figure representing a 51.6 percent decline year-on-year.

Vanke attributed its first half loss to a decline deliveries of completed homes to customers, persistently low gross profit margins and provisions for asset impairment.

“The company deeply apologizes for the performance loss and will continue to make every effort to promote business improvement,” Vanke said in the statement. 

Slump Worsens

Vanke’s warned of its loss as China’s property sector is showing signs that it remains entrenched in a housing slump triggered when developers began defaulting on their debts in 2021. The market slide has continued to worsen despite successive rounds of policy support.

An index of new home prices in 70 major Chinese cities dropped 0.27 percent in June from a month earlier, while second-hand home prices fell 0.61 percent over the same interval, marking the steepest declines in the past eight months, according to an analysis by European bank ING based on official data released last week. The bank pointed to ongoing consumer concerns regarding the property slide.

“Given the prominent position of real estate in household balance sheets, it would be difficult to expect a turnaround in confidence as long as households’ biggest asset depreciates every month,” said Lynn Song, chief economist for Greater China at ING.

Monthly sales for China’s top 100 developers fell by 22.8 percent year-on-year in June, marking their worst drop in nine months, according to data from China Real Estate Information Corporation.

Shares Drop as Cash Outlook Decays

Following the profit warning, Vanke shares fell by 2.5 percent last week to close on Friday at HK$5.17 per share. 

Fitch Ratings in May further downgraded some of Vanke’s bonds into junk territory after the company reported a 38.3 percent year-on-year decline in contracted sales for the first quarter, underperforming a 10 percent drop for China’s top 100 developers.

“The downgrade is driven by China Vanke’s 1Q25 sales and cash flow generation that were weaker than we expected, leading to a further reduction in its liquidity buffer against significant capital-market debt maturities this year,” Fitch said in a ratings action note.

With RMB 71.1 billion of unrestricted cash as of the end of March, the developer faced short term debt of RMB 156 billion, including capital market debt of RMB 27 billion maturing in the next 12 months, Fitch said in May.

In its Monday statement, Vanke said it has secured RMB 24.9 billion in new financing and refinancing (excluding shareholder loans) during the first half of 2025, and successfully completed the repayment of RMB16.49 billion in public debt. No offshore public debt is due before 2027, the company said.

Financial Lifeline

Following a shake-up in January that saw Vanke’s president and CEO Zhu Jiusheng sacked and long-serving chairman Yu Liang demoted in favour of new executive leadership from controlling shareholder Shenzhen Metro, Vanke has repeatedly received cash injections lifeline from its state-owned backer. 

Earlier this month, Shenzhen Metro provided Vanke with a RMB 6.2 billion three-year loan at a 2.3 percent interest rate to help the developer repay maturing bonds. This cash infusion marked the sixth loan that the transit operator has provided its subsidiary this year, with the debt totalling over RMB 21 billion.

Vanke has made a preliminary proposal to several major Chinese banks to extend some of its debt by as much as 10 years, Bloomberg reported Wednesday, citing people familiar with the matter.