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State-backed real estate developer China Vanke narrowly avoided defaulting on 2 billion yuan ($284 million) of its bonds last week as China’s real estate market slowly recovers. Vanke was once China’s largest residential builder by sales.
this Chinese The developer is also seeking to defer repayment of another 3.7 billion yuan ($530 million) of onshore debt due on Dec. 28, with bondholders agreeing to extend the deadline until February.
Years after the real estate market began to slump, Chinese developers are still struggling to regain their footing despite a series of government policies aimed at reviving the industry. Weak investment and house prices have shaken investor confidence and spread to the wider economy as millions of homeowners’ apartments are worth far less than what they paid for them.
The housing market is no longer the huge driver of prosperity it once was, but is instead putting pressure on the economy.
Vanke’s dilemma
Although Vanke’s bondholders have approved a moratorium on debt repayments, default risks remain.
About third party ownership Shenzhen The finances of the subway, state-owned railways, and publicly listed Vanke are in a mess. Its revenue fell 27% year-on-year in the most recent July-September quarter, and trading in many of its onshore bonds was suspended after prices tumbled.
The developer owes more than $50 billion, less than China Evergrande’s debt of more than $300 billion. China Evergrande was one of the first real estate dominoes to fall when it defaulted in 2021 after the government cracked down on over-borrowing in the real estate sector.
Analysts say Vanke, founded in the 1980s in the southern boomtown of Shenzhen, may be testing state support for property developers in a bid to revive the industry, which once accounted for more than a quarter of China’s economic activity.
China’s real estate industry remains sluggish
More than four years after the economic downturn began, China’s real estate industry has yet to recover. The situation varies from city to city, but overall home prices are down 20% or more from their 2021 peak.
Official statistics show that the downward trend continues, with new home sales in the first 11 months of 2025 falling 11.2% year-on-year. Real estate investment fell nearly 16% year-on-year.
The recession has led to massive layoffs, hurting overall consumer confidence and spending.
“The continued decline in the property market remains one of the biggest risks to China’s shift to a domestic demand-driven growth model,” Lynn Song, chief economist for Greater China at ING Bank, wrote in a recent commentary.
As one of China’s largest developers, China Evergrande, once considered “too big to fail,” ran into trouble in 2021 and was eventually forced into liquidation. Many other Chinese developers have also defaulted and, in some cases, restructured. Tough measures to combat Covid-19 during the pandemic have taken a toll, with construction projects suspended.
Economists say it could take years to restore confidence in housing sector Morgan Stanley Said that Vanke’s difficulties will only further affect its real estate market prospects. Economist in morningstar Despite repeated pledges from regulators to stabilize the housing market, house prices are unlikely to rebound before 2027 due to oversupply.
State support for Vanke may be insufficient
Although Vanke has much smaller debt than Evergrande, a default would be painful: Vanke was once considered one of China’s better-financed real estate developers.
Shenzhen Metro Group, controlled by the Shenzhen municipal government, has provided more than 29 billion yuan ($4 billion) in shareholder loans to Vanke so far this year to help it repay debt, according to S&P Global.
This is not enough to repay all of its obligations. Fitch Ratings said Vanke had 60 billion yuan ($8 billion) in cash as of September 2025 and short-term debt of about 151 billion yuan ($21 billion).
“This is one of the most significant, quasi-state-backed developers that could default on repayments,” said Foreky Wong, founding partner of Fortune Ark Restructuring.
Standard & Poor’s Global, one of the world’s major ratings agencies, recently downgraded Vanke’s rating to “selective default,” saying that extending the bond repayment period would be considered a distressed debt restructuring and “equal to a default.” Fitch Ratings also downgraded Vanke’s rating to “restricted default.”
What happens next?
Vanke, which had more than 120,000 employees as of last year, still faces hundreds of millions of dollars in debt repayments through 2026. Standard & Poor’s said the company faces more than 9.4 billion yuan in bonds maturing in the next six months.
Morningstar analyst Jeff Zhang said Vanke’s default could ripple through the broader real estate industry, making it harder for non-state developers to get help.
“If the Shenzhen government does not make a strong commitment to the bailout, we believe Vanke’s liquidity position should remain fragile,” Zhang said.