Beijing Steps In: Vanke's Bailout Amid China's Real Estate Meltdown | Vantage with Palki Sharma

in China the crisis in the property sector is also far from over a new developer faces the risk of collapse it's called Vani it's a major player in the real estate sector in China and it's been sinking unable to pay its debt the company owes some 34 billion yuan that's almost 5 billion us doar and this debt must be repaid before June 2025 before June next year but Banky may not be able to do that they may not have the cash to do it so now Beijing is stepping in ex extending support and propping up the company which has taken many observers by surprise because in the past China has let big developers fail since 2020 more than 50 developers in China have either defaulted or failed to make any debt payments 5050 just last year 10 Chinese developers missed debt payments and in all these cases says Beijing just stood by and watched but Vani has been Lucky China has made arrangements to rescue it it has issued orders to 12 Banks they've been instructed to provide financing to Vani the question is why why is this developer getting special treatment because it's not just about the developer anymore it's also about China's economy if Vani 2 is allowed to fail it will break the economy because this is China's second largest developer we we're talking about it started some 40 Years Ago by this man wongi now wangshi is a leading figure in Chinese real estate he is often called The Godfather of the industry in China and he's believed to be close to the state in 2017 Vani faced a hostile takeover bid guess who stepped up to rescue it the government of shangai they bought shares in wanki and they helped wangshi survive even today shangai owns around a quarter of Vani making it the company's largest shareholder these shares are owned by the shenzen Metro Group which is a state-owned firm so the new bailout should not come as a surprise but there's more to this relationship China needs Vani as much as the company needs the state because China's economy is struggling and they're betting on real estate to revive it earlier this month the Chinese Premier made some promises listen to this we need to optimize real estate policies promote the stable and healthy development of the real estate market coordinate the resolution of local debt risks and stable development Vani is instrumental to this plan so far this company has been able to weather the storm the storm that engulfed China's real estate sector when others were defaulting wkei was still R for investment but towards the end of 2023 the company's fortunes changed there was a drastic drop in sales last year sales dropped by 10% this year the numbers have worsened January saw a decline of 32% which caused Panic among wanky investors since November 2023 their shares have lost close to 30% in value and this Panic spread to the creditors too there were murmers of a cash crunch reports like this one surfaced it said Vani is speaking to its creditors at wants an extension on some debts and this week the crisis intensified when Moody's downgraded Vani classified the company's debt as junk that's how wkei got into this mess China may be betting on its Revival but this crisis has highlighted a fundamental problem with China and Its Real Estate sector the problem is that there is no demand for Real Estate the market doesn't have enough buyers and that's a big problem for companies like vankey because real estate developers need a steady flow of cash to survive they need to sell homes in order to keep building more but that's not happening there simply isn't enough cash coming in so the company cannot finish its projects Vani has contract liabilities worth 48 billion yuan which is around $56 billion and what are contract liabilities it's mostly money deposited by home buyers to buy an apartment for instance the money that you give a builder but chances are this apartment is yet to be finished it's not ready so the home buyers money is stuck in the past China would leave them in the Lurch but it can no longer afford to do so on the supply side it is necessary to reform and improve the basic systems for development financing and sale of commercial property the sale of existing houses should be promoted in a forceful and orderly way well that's how desperate China is it wants to revive home sales even if that means deploying what it calls forceful measures the last thing China can afford is another failed developer

Channel: Firstpost

Views: 135,863

Keywords: firstpost, vantage, palki sharma, vantage palki sharma, firstpost palki sharma, china vanke, china vanke credit rating, china vanke credit rating junk, china vanke junk credit rating, china vanke rating, china vanke rating junk, china vanke property developer, china helps vanke, china financial support to vanke, china financial support vanke, china vanke financial support, china vanke collapse, china vanke news, china financial aid vanke, china financial aid to vanke

Id: PKlGJtrSe5w

Length: 5min 19sec (319 seconds)

Published: Thu Mar 14 2024