(C) The Epoch TImes

BEIJING – Vanke (萬科), one of China's largest property developers and a company once seen as relatively safe due to its state-backed major shareholder, has been plunged into a severe default crisis. The company announced via public disclosure that it failed to secure creditor approval for a one-year extension on a debt repayment due on December 15, escalating fears across the nation’s troubled real estate sector.

The news comes as a major blow to market stability. Vanke, often dubbed a "real estate giant," had proposed three measures to creditors regarding a $2 billion yuan (approximately $420 million) debt: a one-year extension of the repayment deadline, credit enhancement, and adherence to the interest due date. All three proposals failed to achieve the necessary 90% creditor support for passage. With the extension denied, Vanke now faces an imminent default, as the debt agreement requires repayment within five business days.

This is a critical moment for Vanke, which was one of the few large developers to survive the initial wave of defaults that struck giants like Evergrande (恒大) and Country Garden (碧桂園) in recent years. The property market in China has been struggling to rebound, with weak home sales re-emerging as a major concern since the second quarter of the year. Vanke's deepening financial distress suggests the crisis is far from over, potentially infecting parts of the market previously considered secure.

Vanke is also seeking a one-year extension for a larger $3.7 billion yuan (approximately $770 million) debt set to mature on December 28. A creditor meeting for this proposal is scheduled for December 22.

The situation has been exacerbated by actions from Shenzhen Metro, Vanke’s largest state-owned shareholder, which had previously provided over $30 billion yuan (approximately $6.3 billion) in shareholder loans. Recent weeks have seen Shenzhen Metro tighten its fundraising requirements, according to Bloomberg, further intensifying Vanke's liquidity pressure.

Vanke’s financial turmoil risks aggravating market sentiment. The difficulties of the property sector and domestic consumption shortfall have been identified as key reasons why the Chinese economy has struggled to find clear momentum following the COVID-19 pandemic. The instability of Vanke—a company where a state-owned enterprise is the top shareholder—could severely undermine confidence in the entire real estate market.

In response to the broader economic headwinds, the Chinese government held the Central Economic Work Conference (CEWC) from December 10-11, chaired by President Xi Jinping, to set the economic policy direction for the coming year. The conference specifically designated the real estate slump and local government debt as "key risks," ordering market stabilization measures for the property sector, including controlling new supply, resolving vacant units, and optimizing supply structure.

However, the sheer scale of Vanke's potential default is a major concern. With interest-bearing liabilities estimated at $364.3 billion yuan (approximately $76.2 billion), Vanke’s financial footprint is significantly larger than that of the already defaulted Evergrande and Country Garden. This has fueled renewed fears about the systemic nature of China’s real estate crisis.

Market observers, including Li Huan, co-founder of Forest Capital Hong Kong, argue that merely extending debt deadlines will not resolve Vanke’s fundamental issues and risks causing further turmoil in financial markets. They stress that a comprehensive debt restructuring is becoming inevitable for the property giant.