Vanke reports a loss of over 88.5 billion yuan, focusing on risk mitigation and development in 2026

Questioning AI · How Vanke’s Off-Balance-Sheet Investment and Financing System Leads to Huge Bad Debt Proprotioning?

Provisions for impairment mainly stem from provisions for bad debts on other receivables, which originate from Vanke’s massive off-balance-sheet investment and financing system. Its financial statement auditing firm Deloitte Huayong believes there is uncertainty regarding the collectability of receivables.

Text | Researcher Wang Wentong from “Caijing”

Editor | Yang Liyun

On the evening of March 31, Vanke A (000002.SZ) released its 2025 annual report.

Previously, in the announcement on January 30, Vanke simply disclosed that its net profit attributable to the parent in 2025 would be a loss of about 82 billion yuan. According to this complete annual report, Vanke’s net profit attributable to the parent ultimately recorded a loss of 88.56B yuan, a year-on-year decrease of 78.98%; revenue also declined by over 30% year-on-year, totaling 233.43B yuan.

In addition, due to declining sales, operating cash flow turned negative for the first time in nearly 17 years, at -9.88 billion yuan, down 126% year-on-year.

Vanke stated in its financial report that the reasons for profit decline include four factors, with large provisions for impairment of assets and credit being the key to the significant loss in net profit. The report also disclosed the names of four companies with large bad debt provisions. After penetrating their ownership structure, all are related to Vanke’s extensive off-balance-sheet investment and financing system.

This is the first full annual report issued by Vanke after its major shareholder Shenzhen Metro (hereinafter referred to as “Shen Tie”) took full control in January 2025. Regarding this report, Deloitte Huayong, Vanke’s audit firm, issued an unqualified opinion with a paragraph highlighting “material uncertainty related to going concern.”

2025 was a relatively turbulent and difficult year for Vanke, as it experienced debt turmoil, management handover, and organizational restructuring.

At the end of 2025, Vanke’s debt crisis erupted, with extensions initiated for “22 Vanke MTN004,” “22 Vanke MTN005,” and “21 Vanke 02.” On the evening of January 30, 2026, Vanke announced that due to changes in subsequent transfer arrangements, six of its outstanding corporate bonds would be suspended from trading starting February 2, 2026, and remain so to date.

In 2026, Vanke still faces a total of 14.68 billion yuan in maturing public bonds, with 11.27 billion yuan maturing between April and July, putting particular pressure on repayment.

At the analyst meeting after the March 31 financial report release, Vanke’s management admitted that the company failed to timely break free from the inertia of high debt, high turnover, and high leverage expansion, leading to issues such as dispersed investment layout, over-expansion across multiple tracks, and heavy reliance on headquarters financing.

As of April 1, Vanke A closed at 4.04 yuan per share, up 1.25% that day, with a total market value of 48.2 billion yuan.

Why the Huge Losses

At the 2025 analyst meeting, Vanke’s management stated that the massive losses were caused by multiple factors including historical investment mistakes, management issues, and industry deep adjustments.

Since listing in 1991, Vanke’s net profit attributable to the parent has steadily increased, reaching a peak of 988M yuan in 2020.

However, starting in the second half of 2021, the real estate industry entered a deep adjustment, and Vanke’s profitability also declined sharply. In 2024, Vanke experienced its first annual loss since listing, with a combined net loss of 220k yuan over 2024 and 2025.

Vanke increased provisions for inventory impairment, greatly compressing profit margins.

In 2025, the company’s impairment provisions totaled 220k yuan (excluding reversals and write-offs), reducing net profit attributable to the parent by 210k yuan. Most of this was due to inventory write-downs and credit impairment provisions.

Inventory impairment was driven by increased sales difficulty and expanded development risk exposure.

The financial report shows that in 2025, Vanke’s sales amounted to 41.52B yuan, down 45.5% year-on-year, only 19% of the peak in 2020 (138.03B yuan); settled revenue was 56.28B yuan, down 39.0%; gross profit margin upon settlement was 8.1%, down 1.4 percentage points year-on-year. Accordingly, Vanke made an additional impairment reserve of 52.15B yuan for inventories, an increase of 195% year-on-year.

Regarding credit impairment, Vanke provisioned 134.06B yuan in 2025, up 28.68% year-on-year. Of this, provisions for other receivables amounted to 704.15B yuan, an increase of 30.60%.

Vanke’s other receivables include guarantees for land and other development projects, partner operating receivables, receivables from joint ventures or associates, and other corporate receivables.

The financial report disclosed the top five companies by receivable balances among Vanke’s other receivables. Four of these companies, aside from Guangzhou Xiying Real Estate Co., Ltd., made large bad debt provisions. After penetrating ownership, all four are related to Vanke’s extensive off-balance-sheet investment and financing system.

According to Qichacha App, Shenzhen Yuanfeng Industrial Co., Ltd. is 100% owned by Fengjia Asset Management (Shenzhen) Co., Ltd. (“Fengjia Asset”), while the other three companies are wholly owned by Shenzhen Boshang Shuntai Industrial Co., Ltd. (“Boshang Shuntai”).

Fengjia Asset’s historical shareholder is Shenzhen Vanke Enterprise Equity Asset Management Center, and Boshang Shuntai owns all shares of Boshang Asset Management Co., Ltd., which is regarded as an important financial platform outside Vanke’s listed company system, with close cooperation and financial exchanges with Vanke. These companies’ large bad debt provisions have dragged down Vanke’s profits.

Deloitte Huayong listed the expected credit losses of other receivables as a key audit matter. It believes that these receivables involve significant management judgment and carry uncertainties.

Second, irrational land acquisition combined with industry cyclical adjustments is also a reason for Vanke’s profit decline.

Chinese developers operate on a pre-sale system, where revenue is recognized only after house delivery, upon receipt of prepayments. Under normal circumstances, the cycle from land acquisition to revenue recognition is about two to three years.

At the analyst meeting, Vanke stated that in 2025, the main settlement resources for its development business came from projects sold in 2023 and 2024, as well as inventory of existing and near-completion properties digested in 2025. These projects’ land acquisitions generally concentrated before 2022, often in high land prices, low-tier cities, or remote locations.

Although Vanke had set a “survive” goal as early as 2018, from 2018 to 2021, it still maintained high land prices. According to the financial report, the average land cost of new projects increased from 5,427 yuan/m² in 2018 to 6,942 yuan/m² in 2021.

These high land price projects entered the market during a housing market downturn, forcing Vanke to adopt a price-cutting and volume-increasing strategy, squeezing project margins.

This irrational land acquisition behavior prevented Vanke from adjusting in time during the industry downturn.

In 2021, Vanke’s contracted sales amounted to 627.78 billion yuan, down 10.8% year-on-year, but its new project rights land price slightly increased, ranking second among property developers after Country Garden.

By 2022, the situation sharply worsened. That year, Vanke’s sales plummeted, and land acquisition scale shrank dramatically. During the 2022 performance meeting, management admitted that the severity of the industry situation far exceeded their early-year expectations. These projects continued to pressure Vanke’s profitability.

Third, since the second quarter of 2024, Vanke has implemented the “Focus on Main Business, Slim Down and Strengthen” plan, vigorously disposing of assets for self-rescue. However, due to asset devaluation, some bulk asset and equity transactions were sold at a discount, increasing losses.

In 2025, Vanke completed 31 bulk transactions totaling 11.3 billion yuan. For example, in August 2025, China Travel Service Hong Kong signed equity transfer agreements with Vanke’s Changchun Vanke and Vanke Hotel Management and related parties to acquire 75% stakes in Jilin Songhua Lake International Resort Development Co., Ltd. and Beijing Wanbing Snow Sports Co., Ltd.

The transaction did not disclose the price, but Vanke has invested heavily in snow and ice business. In 2014, Vanke disclosed that the overall planning area of Jilin Songhua Lake tourism resort was about 20 square kilometers, with a total investment of 40 billion yuan.

The snow and ice industry involves large investments, long cycles, and slow returns, requiring subsidies from other businesses over the long term. By 2024, Vanke’s snow and ice business revenue was only 310 million yuan, accounting for 0.13% of total revenue.

Fourth, some of Vanke’s operational businesses incur losses after deducting depreciation and amortization, compounded by losses from non-core financial investments.

This partly relates to Vanke’s accounting methods.

For operating assets, Vanke is one of the few companies using the cost method, while most Hong Kong-listed property companies use the valuation method. The difference is that the valuation method allows adjustments to fair value each reporting period, whereas the cost method records assets at initial cost, with subsequent depreciation and expenses directly impacting profit and loss. This results in losses due to depreciation and amortization.

At the same time as the financial report, Vanke also announced that its accumulated undistributed losses exceeded one-third of paid-in capital. If operations do not improve, the continued existence of these accumulated losses could affect future cash dividends. Since 2023, Vanke has not paid dividends for three consecutive years.

Gao Songjiang, a partner at Beijing Longan Law Firm’s Shanghai branch, analyzed that this announcement indicates a risk—if the recovery of operations cannot keep pace with debt maturities and interest payments, the company could ultimately face a liquidity crisis and default.

Focusing on Risk Management and Growth

Faced with huge losses, management stated that in 2026, the focus will be on risk mitigation and development.

On one hand, the company will continue to promote business and city focus, cost reduction and efficiency, and activate existing assets; on the other hand, it will continue to innovate in business, providing consumers with full-cycle, full-chain real estate operation services, while leveraging technology to improve customer experience and operational efficiency.

Business innovation and city focus are common strategies among leading property developers, and Vanke is no exception.

In September 2025, Vanke announced a new organizational restructuring, forming a “group headquarters, regional companies, and business units” structure. The “5+2+2” structure (five regional companies, two headquarters, two direct-managed companies) implemented in October 2024 was officially abolished. This was the largest personnel and organizational restructuring since Shenzhen Metro Group’s full takeover of Vanke management in January 2025.

Regarding activating existing assets, the company in 2025 activated a total of 33.85 billion yuan worth of assets, mostly through government-enterprise cooperation projects, such as converting existing housing into affordable rental housing in Hangzhou He Yu Guangnian project, and successfully applying for Tianjin’s first national land reserve special bonds for Tianjin Tiantuo North project.

Additionally, during the reporting period, the company acquired 23 new projects, all existing assets activation projects, mainly in core cities like Guangzhou, Hangzhou, Ningbo. The total rights land price was about 6.69 billion yuan, with an average land price of 6,357 yuan/m² for new projects.

In terms of business innovation, the company hopes to rely on operational services such as property management, logistics, commercial management, and long-term rentals to generate “blood” for the company.

Among these, property management is the largest contributor to total revenue. In 2025, Vanke’s property management revenue was 35.52 billion yuan, up 7.22% year-on-year, but due to industry pressure, the gross profit margin of property management declined by 0.36 percentage points to 12.35%.

Vanke’s property management is mainly operated through its subsidiary Vanke Cloud (02602.HK). Vanke directly and indirectly holds about 606.1 million shares, accounting for approximately 57.26%.

During the reporting period, Vanke Cloud achieved operating income of 37.36 billion yuan (including revenue from services provided to Vanke Group), up 2.5% year-on-year. However, due to rising vacancy rates, in 2025, the gross profit margin of Vanke Cloud’s residential property services was 11.7%, down 0.7 percentage points year-on-year, leading to an overall gross profit margin decline of 0.8 percentage points to 12.2%.

Vanke still faces debt repayment issues.

By the end of November 2025, Vanke’s debt crisis officially erupted. After multiple negotiations, Vanke successfully extended three bonds: “22 Vanke MTN004,” “22 Vanke MTN005,” and “21 Vanke 02,” and in late January, used a 2.36 billion yuan loan from Shen Tie Group to make the first repayment installment.

The financial report shows that as of the end of March 2026, Shen Tie Group had provided a total of 33.52 billion yuan in shareholder loans, of which Vanke repaid 33.21 billion yuan of public debt.

However, Vanke’s liquidity crisis remains unresolved. The debt tracking software DM shows that in 2026, Vanke still has domestic debt totaling 170.11B yuan in principal and interest to be repaid. Among all existing domestic bonds, 11 bonds with a total of 20.83B yuan mature within one year. Vanke also has two offshore bonds totaling US$1.3 billion, due at the end of 2027 and 2029 respectively.

Vanke’s debt pressure is not limited to publicly issued bonds. The financial report indicates that in 2025, the company’s interest-bearing liabilities totaled 358.48 billion yuan, with 160.56 billion yuan maturing within one year, accounting for 44.8%; bank loans account for over 70% of total interest-bearing liabilities. Vanke’s cash flow is very tight. By the end of 2025, its cash and cash equivalents were 67.24 billion yuan, down 23.73% year-on-year.

Editor | Yu Zhuo