Reconsidering the Impact of Vanke's Extension

Why is Vanke extending its debt?

The fundamental reasons are significant debt pressure, poor debt structure, and high short-term repayment pressure. As of the end of September 2025, interest-bearing debt amounts to 362.9 billion yuan, which is already a historical high; in terms of debt structure, according to Vanke's semi-annual report, interest-bearing debt within one year accounts for 42.7%, and the cash-to-short-term debt ratio is only 0.48. If we exclude the restricted portion of cash, the debt pressure would be even greater.

At the same time, Vanke is also facing unfavorable asset disposals and a significant decline in sales, while the "no actual controller" ownership structure limits external support. Under multiple factors, Vanke ultimately opted for an extension.

How to analyze the impact of credit risk events?

We summarize the analysis of credit risk events, combining the Yongmei incident and other historical credit risk events into four points: Whether the credit risk event is beyond expectations; the scale of the debt involved and the participation of investment institutions determine the scope and extent of the event's impact; the representativeness of the entity; and the policy response.

How to view the impact of Vanke's extension?

There are factors in Vanke's extension that exceed expectations, but when the event actually occurs, the market's acceptance seems to be manageable, because essentially, the market's expectations are more about policy expectations rather than good expectations regarding fundamentals and debt pressure.

After experiencing a series of extensions and defaults by real estate companies since 2021, Vanke's credit risk has also undergone a relatively long fermentation. The volume of Vanke bonds held by public funds is already quite small, with large and resilient financial products and banks being the main holders, thus the impact on the market will also be smaller.

From a representational perspective, Vanke carries labels such as real estate company, mixed ownership (due to being taken over by Shenzhen Metro, which is a major shareholder and carries a hint of state-owned enterprise), and significant debt pressure, which may influence weaker private real estate companies (including mixed ownership), weaker state-owned real estate companies, weaker state-owned industrial entities, and weaker urban investment entities.

Looking at the situation on the first trading day after the extension, the short-term impact is generally controllable, mainly affecting weaker private real estate companies and weaker state-owned real estate companies, with no significant further impact observed.

Overall, although Vanke is not a pure state-owned enterprise, its extension may still have representative significance, indicating that credit risk still exists. Combined with the debt resolution policy cycle, this may be the starting point for the market's differentiated credit risk preferences.

The full text is as follows:

Recently, market news indicated that Vanke may address its debt issues through a "market-oriented approach," leading to a consecutive sharp decline in both domestic and overseas Vanke bonds. On November 26, Vanke announced the convening of a bondholder meeting for "22 Vanke MTN004" to review matters related to the extension of this bond Vanke's bond extension, the speed of which exceeds market expectations, how to view it going forward?

How did Vanke move towards the extension?

We have sorted out a series of actions taken by Vanke since 2025, including the departure of the original management team, rumors of the arrest of former directors, loans from Shenzhen Metro for support, and the failure to consolidate Shenzhen Metro's financials. Looking back, some information leading to the extension may have been hidden in the details long ago.

On January 9, Vanke announced that the maturity date of a 2019 insurance asset management debt investment plan by its holding subsidiary Wuhan Yutian Xingye Real Estate Co., Ltd. has been adjusted to December 31, 2026, with a financing balance of 2.04 billion yuan.

On January 15, media outlets such as Economic Observer reported that Vanke's executive director, president, and CEO Zhu Jiusheng was taken away by public security authorities.

On January 19, S&P stated that it downgraded Vanke's rating by two levels to "B-" due to weak liquidity; the rating was placed on a negative credit watch list.

On January 22, Fitch downgraded Vanke's long-term foreign and local currency issuer default rating from "B+" to "B-", while also downgrading Vanke Real Estate (Hong Kong) Co., Ltd.'s long-term issuer default rating, senior unsecured rating, and the rating of its outstanding senior notes from "B" to "CCC+", with a recovery rating of RR4, and placed the aforementioned ratings on a negative watch list.

On January 27, Yu Liang resigned as chairman of the board, and core executives Zhu Jiusheng and Zhu Xu also left simultaneously, with Shenzhen Metro executives fully taking over strategic decision-making authority, deploying more than a dozen executives with state-owned background from Shenzhen to Vanke's headquarters and key regional positions.

Starting in February, Vanke borrowed multiple times from Shenzhen Metro.

On June 26, Octus reported on rumors regarding Shenzhen Metro's consolidation of Vanke's financials.

On November 2, Vanke Enterprises Co., Ltd. announced that on that day, it had signed a "Framework Agreement on Shareholder Loans and Asset Guarantees" with its largest shareholder, Shenzhen Metro Group Co., Ltd. The "Framework Agreement" stipulates that from 2025 until the date of Vanke's 2025 annual general meeting, Shenzhen Metro Group will provide a loan limit of no more than 22 billion yuan to Vanke, while Vanke will provide collateral/pledge guarantees for the actual loans incurred.

On November 25, Vanke stated that it had sold all of its shares in Beike.

On November 26, Vanke announced on the Shanghai Clearing House that it would hold a bondholders' meeting for the "22 Vanke MTN004" bond, to review matters related to the extension of this bond on December 10, 2025. The principal repayment date for this bond is December 15, 2025, with a bond balance of 2 billion yuan and an annual interest rate of 3%.

Vanke's debt pressure is significant and well-known

On one hand, the total amount of interest-bearing debt is large and has continued to grow in recent years. As of the end of September 2025, interest-bearing debt reached 362.9 billion yuan, which is already a historical high.

On the other hand, the debt structure is poor, and there is significant short-term repayment pressure. According to Vanke's semi-annual report, interest-bearing debt within one year accounts for 42.7%, or 155.37 billion yuan, while the company's cash and cash equivalents at the same time were 74 billion yuan, a decrease of 16.1% from the beginning of the year, further reducing the cash-to-short-term debt ratio to 0.48. If the restricted portion of cash is excluded, the debt pressure would be even greater.

Shenzhen Metro provided Vanke with over 10 billion yuan in funding to repay debts.

Shenzhen Metro Group has cumulatively provided loans of 30.796 billion yuan to Vanke. Since Vanke held its 2024 annual shareholder meeting on June 27, 2025, Shenzhen Metro Group has provided the following funds and related arrangements to Vanke in batches: new loans of 6.249 billion yuan, extended loans of 890 million yuan, new loans of 869 million yuan with asset pledges, new loans of 1.189 billion yuan (the loan amount approved by the board on August 5, 2025, is not more than 1.681 billion yuan), new loans of 2.064 billion yuan, new loans of 989 million yuan, new loans of 2.2 billion yuan, and the company provided a pledge of Wanwu Cloud equity as collateral for the existing loans of 1.551 billion yuan.

Despite the continuous financial support from Shenzhen Metro Group, Vanke's liquidity pressure remains prominent.

In addition, Vanke's asset disposal and sales situation are not optimistic. By mid-2025, the balance of investment properties used for pledges and guarantees has reached 80 billion yuan, accounting for 58.2% of the balance of investment properties, leaving fewer and fewer disposable assets. From January to October 2025, the sales amount based on equity was 86 billion yuan, a year-on-year decline of 34.4%, which is a significant drop. Considering the current regulatory funding situation in various regions, the funds actually recovered through sales are very limited.

Moreover, Vanke still faces considerable pressure for bond repayment. From the perspective of bond maturity, the end of this year to the first half of next year is Vanke's peak repayment period. Excluding the proposed extension of 220,000 Vanke MTN004, the bonds maturing within the year amount to 3.7 billion yuan, while the scale of bonds maturing or being exercised in 2026 is 12.419 billion yuan.

Vanke cannot be considered a pure state-owned enterprise.

From the perspective of equity structure, Shenzhen Metro is the major shareholder but not the actual controller. According to the rating report disclosed at the end of May this year, Vanke has "no actual controller." Although executives from the Shenzhen Metro system have fully taken over strategic decision-making authority, there are still significant differences compared to a pure state-owned enterprise

Lessons, Developments, and Insights from Yongmei's Default

On November 10, 2020, without any warning, Yongcheng Coal and Electricity Holding Group Co., Ltd. announced that due to tight liquidity, the company failed to timely and fully repay the principal and interest of "20 Yongmei SCP003" amounting to approximately 1.032 billion yuan, constituting a substantial default, which had a significant impact on the market.

On one hand, Yongmei was a high-quality entity born from the restructuring of coal enterprises in Henan Province. At that time, the general market perception of the credit quality ranking of Henan coal enterprises was "Yongmei > Pingmei Shares > YNHC > Pingmei Shenma > Zhengmei." The relatively better qualified AAA entity Yongmei defaulted first, triggering panic concerns in the market regarding Henan coal enterprises. On the other hand, just before the default, Yongmei transferred its equity in the quality asset, Zhongyuan Bank, a Hong Kong-listed company, through a gratuitous asset transfer, raising market concerns about "debt evasion," and more fundamentally, shaking the foundations of credit analysis.

In addition, the willingness of local state-owned assets to provide rescue during the crisis was far lower than market expectations, quickly leading to a shock in the entire urban investment bond market. By the end of 2020, the urban investment bond yield spread widened significantly, and the yield spread of Henan urban investment bonds continued to fluctuate at a high level in the first half of 2021.

After Yongmei's default, the credit bond market shifted from "state-owned enterprise faith" to more credit risk screening of state-owned enterprises, with the credit spreads of weaker state-owned enterprises widening significantly and showing clear differentiation. The financing difficulties for urban investment companies with weak qualifications intensified, and some institutions began to adopt a "one-size-fits-all" approach, brutally abandoning certain regions, making it increasingly difficult for some urban investment companies to issue new bonds. From October 2020 to May 2021, net financing amounts for urban investment in some provinces and cities, such as Tianjin, Yunnan, Liaoning, and Henan, decreased significantly, with Tianjin's total net financing amount dropping by 87.5 billion yuan, followed by Yunnan Province with a total decrease of 40.9 billion yuan.

At that time, Tianjin Urban Construction had a massive scale of outstanding bonds, heavily relying on refinancing, and the region had a history of provincial enterprise defaults, leading to continuous selling of bonds by investors, with credit spreads widening in the following year.

The situation in Lanzhou was similar; in the primary market, Lanzhou's urban investment bond net financing remained negative throughout 2021; in the secondary market, starting from the Yongmei incident in November 2020, the credit spreads of Lanzhou Urban Investment continued to widen.

In the primary market, the amount of credit bonds canceled or postponed in issuance in the month of Yongmei's default reached 95.29 billion yuan, and the impact extended beyond the scope of Henan coal enterprises, with net financing of credit bonds rapidly turning negative.

From the developments following Yongmei's default, combined with other historical credit risk events, we can roughly summarize the influencing factors of credit risk events into several aspects:

① Whether the credit risk event exceeds expectations.

② The scale of the debt involved and the participation of investment institutions determine the scope and degree of the event's impact.

③ How representative the entity is.

④ The policy response and handling.

We will observe Vanke from these points.

Did Vanke's extension exceed expectations?

Before the extension, the market believed that there were several reasons why Vanke could still hold on, which can be summarized into three points: ① Shenzhen Metro has already provided substantial support, and the remaining bond volume is not too large, leading to market expectations for further support. ② As a former quality real estate company, ensuring Vanke's relative stability in the current declining real estate market is beneficial for maintaining confidence in the real estate market, reflecting the central policy's intent. ③ The Central Economic Work Conference is about to be held, so there is time to wait a bit longer.

Therefore, before Vanke's extension, there were relatively many optimistic investors in the market. This optimism was not about the fundamentals or debt pressure, but rather about policies and external support. Thus, Vanke's current extension is actually quite beyond expectations. However, when it really happens, it seems to be within reason.

Vanke's total interest-bearing debt is over 360 billion yuan, but the remaining domestic debt scale is less than 20 billion yuan. Although the total debt volume is certainly not small, the actual gap is definitely significantly smaller than the total debt volume.

From the perspective of participating investment institutions, the current public institutions holding Vanke bonds should be relatively few. We have compiled the holding data from the 2025 mid-year report and can only observe that two funds hold Vanke's bonds, while others are mainly large-scale financial products and banks with strong volatility resistance.

In summary, the debt volume is not large, the bond volume is relatively small, public fund holdings are few, and financial products and banks hold more, so the market impact itself is not significant.

How representative is Vanke?

Vanke's labels mainly include real estate company, mixed ownership (due to support from Shenzhen Metro, which is a major shareholder, it carries a hint of state-owned enterprise), and overall significant debt pressure.

Therefore, we believe its impact can be divided into four layers: first and foremost are weak-quality private real estate companies (including mixed ownership), followed by weak-quality state-owned real estate companies, then weak-quality state-owned industrial entities, and finally, it may to some extent affect investors' future confidence in weak-quality urban investment.

By observing the valuation situation on the first trading day after Vanke's extension (November 27), we can make a rough observation. On that day, real estate bond yields rose across the board, with long-end yields rising more than short-end yields.

As Vanke has been taken over by local state-owned assets, it is necessary to pay more attention to the impact on local real estate companies. In the medium to long term, the interest spread of local real estate companies with weak qualifications may further widen. Several typical local state-owned real estate companies also face common issues with Vanke, which require continuous attention to their development.

Overall, Vanke's extension has some unexpected factors, but when things really happen, the market's acceptance seems to be okay, because essentially, the market's expectations are all about policy expectations, rather than good expectations regarding fundamentals and debt pressure.

After experiencing a series of extensions and defaults of real estate companies since 2021, Vanke's credit risk has also undergone a relatively long fermentation. The volume of Vanke bonds held by public funds is already quite small, with large volumes and strong volatility resistance being held mainly by wealth management products and banks, thus the impact on the market will be smaller.

From a representational perspective, Vanke carries labels such as real estate company, mixed ownership (due to being taken over by Shenzhen Metro, which is the major shareholder, it also carries a hint of state-owned enterprise), and significant debt pressure, which may affect weakly qualified private real estate companies (including mixed ownership), weakly qualified state-owned real estate companies, weakly qualified state-owned industrial entities, and weakly qualified urban investment companies. Considering the situation on the first trading day after the extension, the short-term impact is generally controllable.

Why did Vanke extend?

The fundamental reasons are significant debt pressure, poor debt structure, and high short-term repayment pressure. As of the end of September 2025, interest-bearing debt is 362.9 billion yuan, which is already a historical high; in terms of debt structure, according to Vanke's semi-annual report, interest-bearing debt within one year accounts for 42.7%, and the cash-to-short-term debt ratio is only 0.48. If we exclude the restricted portion of monetary funds, the debt pressure would be even greater.

At the same time, Vanke is also facing unfavorable asset disposal and a significant decline in sales, while the "no actual controller" equity structure limits the extent of external support. Under multiple factors, Vanke ultimately opted for an extension.

How to analyze the impact of credit risk events?

We summarize the analysis of credit risk events, combining the Yongmei incident and other historical credit risk events into four points: Whether the credit risk event is beyond expectations; the scale of the debt involved and the participation of investment institutions determine the scope and extent of the event's impact; the representativeness of the entity; and the policy response and handling.

How to view the impact of Vanke's extension?

Vanke's extension has some unexpected factors, but when things really happen, the market's acceptance seems to be okay, because essentially, the market's expectations are all about policy expectations, rather than good expectations regarding fundamentals and debt pressure.

After experiencing a series of extensions and defaults of real estate companies since 2021, Vanke's credit risk has also undergone a relatively long fermentation. The volume of Vanke bonds held by public funds is already quite small, with large volumes and strong volatility resistance being held mainly by wealth management products and banks, thus the impact on the market will be smaller.

**From a representational perspective, Vanke carries labels such as real estate company, mixed ownership (due to being taken over by Shenzhen Metro, which is the major shareholder, it also carries a hint of state-owned enterprise), and significant debt pressure, which may affect weakly qualified private real estate companies (including mixed ownership), weakly qualified state-owned real estate companies, weakly qualified state-owned industrial entities, and weakly qualified urban investment companies **

Considering the situation on the first trading day after the extension, the short-term impact is generally controllable, mainly affecting weakly qualified private real estate companies and weakly qualified state-owned real estate companies, with no significant further impact observed.

Overall, although Vanke is not a purely state-owned enterprise, its extension may still have representative significance, indicating that credit risk still exists. Combined with the debt restructuring policy cycle, this may be the starting point for the differentiation of market credit risk preferences.

Authors: Sun Binbin, Meng Wanlin, Tu Jingjing, Source: Fixed Income Binfa, Original Title: "Reconsidering the Impact of Vanke's Extension"

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