China Vanke’s failure to secure bondholder approval to delay a looming bond payment has sharpened concerns that even state-backed developers are no longer insulated from the country’s deepening property slump, raising the risk of a high-profile default that could further damage investor confidence in the sector.
A filing, reported by Reuters, showed that Vanke did not win enough support from bondholders to extend by one year the repayment of a 2 billion yuan ($280 million) onshore bond due on Monday. The rejection followed a three-day vote that ended late on Friday and now leaves the developer with a grace period of five business days to make the payment in full. Approval of the proposal required backing from at least 90% of voting bondholders, a threshold that proved out of reach.
The proposal, which sought to postpone both principal and interest payments without offering additional credit support, was rejected after 76.7% of bondholders voted against it, according to the filing to the National Association of Financial Market Institutional Investors. Two alternative proposals for the same bond, which included credit enhancement measures, attracted more support, with one securing 83.4% approval, but still fell short of the required supermajority. Bloomberg News first reported the outcome on Saturday.
The setback underscores the severity of Vanke’s liquidity pressures and highlights the increasingly tough stance of creditors, even toward companies long viewed as safer bets because of state ties. Vanke is one of China’s most prominent developers, with projects across major cities, and is about 30% owned by state-owned Shenzhen Metro Group. That backing had previously led some analysts to believe the company would be shielded from the worst of the sector’s turmoil.
Instead, the failed vote suggests bondholders are no longer willing to grant time without stronger assurances, reflecting broader fatigue after years of broken promises and restructurings across the industry. Yao Yu, founder of credit research firm RatingDog, said Vanke may now seek to extend the grace period itself to 30 business days. If bondholders approve such a move, it could buy the developer time to negotiate and reach a compromise, but there is no guarantee that creditors will agree.
The latest episode revives memories of the property crisis that erupted in 2021, when tighter regulations triggered a liquidity crunch that toppled some of China’s biggest developers. Former industry giant China Evergrande was ordered to liquidate by a Hong Kong court and was delisted this year, while Country Garden and others have also fallen into distress. Those defaults shattered homebuyer confidence and sent shockwaves through a sector that once accounted for roughly a quarter of China’s gross domestic product.
Since then, weak demand, falling prices, and unfinished projects have continued to weigh on the market and on broader economic growth. A quarterly Reuters survey published this month showed China’s home prices are expected to fall 3.7% this year and continue declining next year before stabilizing only in 2027, underlining how prolonged the downturn has become.
Vanke’s troubles now risk adding a new layer of stress. The developer is also seeking to extend by one year the repayment of another yuan-denominated bond worth 3.7 billion yuan that is due on December 28, with a bondholder meeting scheduled for December 22. Failure to secure relief on that front would further strain its already thin liquidity buffer.
Market pricing reflects mounting anxiety. Vanke’s onshore notes are trading at deeply distressed levels of around 20 to 30 yuan per 100 yuan of face value, while its two offshore dollar bonds are hovering near 20 cents on the dollar. Ratings agency S&P Global downgraded Vanke on November 28, warning that its financial commitments were unsustainable given weak liquidity and that the company was “vulnerable to risks of nonpayment or distressed restructuring.”
The potential consequences extend beyond one developer. With interest-bearing liabilities of about 364.3 billion yuan ($52 billion), any debt restructuring at Vanke would be among the largest of the decade, potentially eclipsing those of privately owned peers such as Evergrande and Country Garden. Reuters reported last month that state-owned China International Capital Corporation had been brought in to assess Vanke’s debt situation, with restructuring among the options under consideration.
The renewed stress is likely to weigh on market sentiment and amplify investor calls for stronger policy support. Chinese leaders said this week they would maintain a “proactive” fiscal policy next year to stimulate consumption and investment, while reiterating their aim to stabilize the property market through city-specific measures.
However, the Vanke episode highlights the limits of incremental support and the growing difficulty Beijing faces in restoring confidence to a sector still burdened by debt, weak sales, and wary creditors.
If a developer as large and strategically important as Vanke struggles to win bondholder trust, it raises uncomfortable questions about how much further the crisis has to run, and whether more forceful intervention will be needed to prevent another wave of defaults from rippling through China’s economy.
