China's Property Crisis Remains Unresolved After Five Years as Vanke Posts Record ¥89 Billion Loss
nashnova research
State-backed developer Vanke posted a record ¥89 billion annual loss, bringing its two-year cumulative deficit past ¥130 billion — proof that China's five-year property downturn is far from bottoming out, with banking risks now building.
What does Vanke's record loss tell us?
Vanke (万科) lost ¥89 billion (≈$13 billion) last year, a company record. Over two fiscal years, cumulative losses exceed ¥130 billion.
This means → even a state-backed developer cannot absorb the downturn. The crisis is far deeper than policy optimists assumed.
In plain terms = if the developer with implicit government support is bleeding this badly, the rest of the industry is almost certainly worse.
How did three giants fall one after another?
Evergrande (恒大) defaulted on more than $300 billion in debt in 2021 — China's largest-ever corporate bankruptcy. It was delisted from the Hong Kong exchange in August 2025; shares went to zero.
Sunac (融创) defaulted in 2022; Country Garden (碧桂园) followed in 2023. Three top developers collapsed in three years, forming the backbone of the crisis.
This reflects a systemic breakdown of the industry's business model, not a string of individual management failures.
How did the bubble inflate in the first place?
China's modern housing market dates from 1998, when urbanization stood at roughly one-third. Urban population has since grown by about 480 million, and home prices rose roughly sixfold in the fifteen years to 2022.
Property once contributed about a quarter of GDP and accounted for nearly 80% of household wealth. In plain terms = most Chinese families had almost all their money tied up in real estate.
The boom ran on leverage: developers pre-sold unfinished homes, borrowed heavily offshore, and carried opaque off-balance-sheet debt. Shenzhen's price-to-income ratio at one point exceeded London's and New York's.
Why did the "three red lines" trigger a collapse instead of a soft landing?
In 2020 Beijing imposed strict caps on developers' debt ratios and cash holdings — the "three red lines" policy — while ordering banks to slow mortgage lending.
This means → highly leveraged developers lost access to refinancing overnight. Combined with pandemic-era construction shutdowns, cash chains snapped, directly triggering Evergrande's 2021 default.
Put simply = the policy aimed to deflate the bubble slowly but ended up popping it.
Are the rescue measures working?
Beijing's latest package includes mortgage subsidies for lower-income families and relaxed home-purchase rules for non-local residents in major cities.
Vanke's loss figures, however, undercut the narrative that the market was already recovering. This reflects a policy effort that may simply be too small.
The real risk lies ahead: falling prices are pushing millions of mortgages "underwater" — where the loan balance exceeds the home's current value — increasing potential losses for banks.
What is the worst-case scenario?
Analysts warn that further price declines could threaten the stability of China's financial system.
This means → the core question is no longer whether developers survive, but whether policymakers can break the falling prices → bad loans → credit tightening → further price drops feedback loop.
In plain terms = household wealth is shrinking, bank balance sheets are deteriorating, and economic growth is slowing — three forces now accelerating each other, and the policy window is narrowing.
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