China’s real estate industry has become a major concern for those monitoring the situation in the world’s second-largest economy. And even though the International Monetary Fund has revised up its growth forecast for China, it still warns: The real estate sector remains a threat to these growth targets. The real estate crisis has already claimed several high-profile victims, including Evergrande last year and Country Garden, one of China’s largest home builders, just a few months ago.Now another big developer called China Vanke is struggling to repay its debts, but Many are wondering if more will follow soon.
China Vanke is one of China’s oldest and largest real estate companies and the second largest home buyer by sales. What became a hot topic in 2015 was Prolonged hostile takeovers by rival Baoneng Group and Evergrande. Both companies bought up shares in the company to gain control. Regulators eventually intervened and blocked the acquisition. The results included disciplinary actions against Everglade and Baoneng, changes to the country’s rules on leveraged buyouts, and ultimately an investment in Vanke by state-owned Shenzhen Metro.
This state investment may ultimately save companies. Unlike other real estate companies that have fallen into financial difficulties, the Chinese government, through Shenzhen Metro, has decided to intervene and shore up the company’s finances to ensure business continuity. Similar treatment is unlikely for other Chinese real estate companies that are not at least partially state-owned.
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