Another big Chinese property developer is teetering on the brink of collapse. This time, however, the outcome for the country’s second-largest developer might be different.China Vanke, however, whose debt was downgraded to junk status by credit ratings agency Moody’s on Monday, is being treated rather differently, with the authorities urging state-controlled banks to come to its rescue.
Earlier this month at the National People’s Congress, China’s Housing and Urban-Rural Development minister, Ni Hong, said troubled developers would be allowed to go bankrupt or be restructured without state intervention. Another is the timing of Vanke’s liquidity challenges, which are occurring even as the central authorities are finally taking some steps to try toWith a massive overhang of new housing, much of it uncompleted developments, housing starts at 60 per cent of pre-pandemic levels, prices that have fallen about 10 per cent in each of the past two years and are still falling and weak demand – Moody’s estimated Vanke’s own contracted sales for the first two months of this year were down 40 per cent on...
That may not be a permanent solution. It could even create more issues in future in a market that already has millions of unoccupied apartments and a shrinking population by adding to the over-capacity. It would also be very costly – hundreds of billions a year – if it is to have a material impact. Beijing has been buying properties held by effectively bankrupt developers and offering them as subsidised rental units to low-income households.A precondition for increased consumer confidence is the stabilisation of the property sector. More than 80 per cent of Chinese own their own homes and more than 20 per cent of urban households own multiple homes, making property the major repository of household wealth.