In early 2026 Shenzhen, the house that once stood for China’s property boom and corporate governance—China Vanke—delivered two jolting notices within days. Its largest shareholder, state-backed Shenzhen Metro Group, offered a RMB2.36 billion lifeline at an almost subsidised rate (LPR minus 66 basis points). Three days later Vanke reported an expected 2025 net loss of about RMB82 billion, the largest single‑year loss in A‑share history, and disclosed a raft of rolling debt extensions and near‑term rigid payments.
The scale of the damage is stark: Vanke said it has extended debt involving principal of roughly RMB6.8 billion, while more than RMB11.26 billion of rigid repayments fall due by the end of July 2026. The company’s liquidity has been drained to keep projects and guaranteed deliveries moving—the partial completion of 117,000 homes in 2025 came at the cost of almost all usable cash. That trade‑off underscores the immediate systemic risk to creditors, homebuyers and smaller suppliers dependent on Vanke’s cash flow.
The calamity is not merely cyclical. The company’s recent implosion reads as an institutional failure of the “professional manager” model that once defined Vanke. The roots trace back to a 1988 share reform in which founder Wang Shi ceded his personal stake in employee shares in the name of creating a modern, manager‑run enterprise. For decades the arrangement looked like a model of governance: efficient executives running a decentralised shareholder base. Over time, however, power consolidated in a managerial inner circle led by executives such as Yu Liang and Zhu Jiusheng, while shareholder oversight remained diffuse.
That concentration of operational authority, paired with limited owner scrutiny, created incentives that critics now call “compensatory capture”: managers extracting outsized benefits without commensurate equity exposure. Allegations from project partners such as Yantai Bairun and media reconstructions describe a pattern of off‑balance liquidity churn. In one flagged case, a Yantai development with 120,000 square metres of floor area had a project company capitalised at just RMB12 million despite a normal capital requirement north of RMB150 million.
The mechanisms alleged are familiar to corporate forensic accountants: group‑level cash pools that redeploy funds away from individual project companies; intra‑group financing through high‑interest loans issued by off‑balance “finance” entities; and structurally complex co‑investment (follow‑on) plans that give managers priority paybacks and yield while leaving ordinary shareholders exposed. Public market data show a striking asymmetry: Vanke’s share price and shareholders’ equity eroded over years even as senior management compensation and follow‑on returns remained at the top of the industry.
The 2015 activist episode with Baoneng crystallised the tensions. When outsider investor Yao Zhenhua, backed by fronting funds, aggressively accumulated Vanke shares, the management and founding circles waged a defensive campaign. Contemporary hindsight suggests that the managers feared, above all, the audit and transparency an activist owner would bring; the implication is stark—what looks like principled resistance to a “hostile” buyer may have been protection against scrutiny.
Operational decisions in recent years compounded the governance problems. Despite public exhortations to “survive” after 2018, Vanke pursued aggressive land acquisition between 2019 and 2021, snapping up expensive plots that now weigh heavily as impaired assets. Parallel expansion into long‑rent apartments, logistics and retail—after depreciation and writedowns—has produced structural losses. Management has argued that high land costs, falling margins and asset impairments explain the RMB82 billion shortfall; critics contend these trends also mask resource diversion and strategic misallocation.
For Beijing and market regulators, Vanke poses an awkward test case. The company carries state ownership traces via Shenzhen Metro’s intervention, and its collapse would be politically sensitive given the millions of homeowners and small contractors that sit downstream. Calls for a forensic, structural audit are rising: Vanke’s public loss should be converted into a ledger of accountability, proponents argue, rather than a set of headline‑only write‑downs.
The broader lesson reaches beyond one troubled champion. Vanke’s descent illustrates how the professional manager model, when divorced from effective external governance—large, engaged shareholders, robust regulators and transparent auditing—can morph into a vehicle for managerial enrichment and organisational fragility. China’s property sector has weathered many shocks; the Vanke episode could trigger closer oversight, tighter rules on intra‑group financing, and renewed pressure for clearer beneficial‑ownership and compensation disclosure.