China Vanke, a state-backed developer that was once among the country’s biggest homebuilders by sales, narrowly avoided default on a 2 billion yuan ($284 million) bond last week as the recovery in China’s property market remains painfully slow.
Vanke also sought to delay repayment of another 3.7 billion yuan ($530 million) of onshore debt due Dec. 28, and bondholders agreed to extend the deadline to February, according to the report.
The episode comes years after the downturn in China’s housing market began, with homebuyers and investors still grappling with weak sales and lower prices. The report said the slump has weakened investor confidence and has spilled into the broader economy, as millions of homeowners are stuck with apartments that are worth far less than what they paid.
Vanke’s position has attracted particular attention because, while it is state-backed, the financing strain appears to be testing how far support will go. About a third of the company is owned by Shenzhen Metro, a state-owned railway, the report said.
In the latest July-September quarter, Vanke’s revenue fell 27% from a year earlier, and several of its onshore bonds were suspended from trading after prices plunged, the report added. Vanke owes more than $50 billion, the report said, compared with more than $300 billion in debt accrued by China Evergrande, one of the first major developers to fall after a 2021 government crackdown on excessive borrowing.
The property sector’s broader condition remains weak. More than four years after the downturn began, the report said China’s overall home prices are down 20% or more from their peak in 2021, and new home sales fell 11.2% by value year-on-year in the first 11 months of 2025. Property investments fell nearly 16% from a year earlier, the report said.
Analysts also linked the drag from the sector to consumer confidence. “The continued slide in the property market remains one of the most significant risks to China’s efforts to shift to a domestically demand-driven growth model,” wrote Lynn Song, chief economist for Greater China at ING Bank, in a recent commentary, according to the report.
Ratings agencies have also moved Vanke into distressed territory. The report said Shenzhen Metro Group, controlled by the Shenzhen government, has provided more than 29 billion yuan ($4 billion) in shareholder loans to Vanke so far this year to help with debt repayments, citing S&P Global data. But it said that support has not been enough to fully cover the company’s obligations, with Vanke reporting 60 billion yuan ($8 billion) in cash at the end of September 2025 against short-term debts of about 151 billion yuan ($21 billion), citing Fitch Ratings.
In recent actions, S&P Global downgraded Vanke to “selective default,” saying it viewed the extension of its bond repayment period as a distressed debt restructuring “tantamount to a default,” the report said. Fitch Ratings downgraded Vanke’s rating to “restricted default,” it added.
Looking ahead, Vanke still faces more debt repayments, the report said. S&P said Vanke has more than 9.4 billion yuan of bonds maturing over the next six months, and it said the company employed more than 120,000 people as of last year. The report also said economists and analysts expect the sector to remain under pressure and suggested that restoring confidence could take years.
The report said a Vanke default could spill over into the wider real estate sector and make it more difficult for non-state-owned developers to get help, citing Morningstar analyst Jeff Zhang. Zhang said: “Without a strong commitment by the Shenzhen government on the bailout, we think Vanke’s liquidity profile should remain fragile,” according to the report.