Financial Services Association, April 14 (Reporter Wang Haichun) Vanke, which is in the midst of the storm, held an investor exchange meeting today to respond to hot issues that the market and investors are concerned about. The reception staff for this exchange meeting included Yu Liang, Chairman of Vanke's Board of Directors, Zhu Jiusheng, President of Vanke, and Zhu Xu, Secretary of Vanke's Board of Directors.

Regarding Vanke's overall business situation, Vanke's management said that the company did encounter phased operating difficulties, and liquidity was under pressure in the short term. However, Vanke has formulated a package of plans to stabilize operations and reduce debt, which can properly resolve these phased pressures.

“First, based on 'self-rescue', we will self-mitigate risks based on our capabilities and resources, re-open and review all of our businesses, sort out the categories, and formulate targeted plans. The plan we mentioned is not a plan; it is a series of plans. Second, by making full use of the various existing financing instruments, the company has actively mobilized various frontline forces to make good use of a series of policy financing instruments introduced by the central government to help the industry mitigate risks.” According to Vanke.

Vanke's management explained that during this period, the company received understanding, support, guidance, and help from financial institutions. The ultimate goal of these major plans is to substantially resolve Vanke's debt risk, and the company is confident that the debt scale will be reduced by 100 billion yuan this year and next.

“Here, I solemnly promise that all Vanke Group projects will be delivered on time and with high quality.” According to Vanke's management.

Reflect on your own problems

As to what is causing Vanke's current challenges, after careful discussion and deep reflection, Vanke Group's management team believes that although there are external market changes, it is more because the company itself maintained its inertia of expansion and failed to adjust in a timely manner when major changes in macro and industry conditions occurred.

Among these, there are three main issues.

First, although Vanke first realized the need for transformation and development in the industry, proposed the “equal emphasis on development and management services” business philosophy, and laid out a number of business services and business formats, there are problems with going too far and too hasty in the actual operation process. The transformation business exceeded the company's ability to match resources, took up too much development business capital, and was too large to keep up with management capabilities and failed to achieve business goals as planned.

Second, although Vanke realized early in the industry that rapid growth would eventually come to an end, its actions have failed to resolutely break away from the industry. In many cities, including some key cities and first-tier cities, there have been aggressive investments and mistakes. After the central government clearly proposed the goals and requirements for high-quality development of the industry, it was unable to make more thorough adjustments to the “three highs” model that generally exists in the industry, leading to a passive situation today.

Third, after the central government clearly made a strategic judgment that the relationship between supply and demand in the industry had fundamentally changed, and introduced a series of important policies and measures for the transformation of the industry's new development model, Vanke's understanding of trending changes in the financing model was not comprehensive enough at the beginning. Vanke has already begun to adjust its real estate financing model, but it still takes a process to shift from focusing on credit financing to a new financing model.

Responding to the Yantai “Report” Incident

Regarding the real-name reporting incident in Yantai, Vanke's management said that the company's personnel and company have cooperated with Yantai Vanke to develop real estate projects for nearly 10 years and have cooperated on 7 projects.

Beginning in 2021, due to the overall market environment, sales of several projects in Yantai fell short of expectations, and profits were unable to reach initial targets. In order to guarantee the funds required for project construction, delivery and normal operation, the project company's funds cannot continue to be distributed according to the wishes of the Yantai partners. At the same time, the Yantai partner, as a shareholder, ignored the project company's construction delivery and normal operation requirements, and put forward a huge claim of 1.6 billion yuan without reasonable basis. Although Yantai Vanke and Yantai partners have communicated many times, they have never been able to reach an agreement. The Yantai partners have since made numerous reports to the government, public security, the tax bureau, the Securities Regulatory Commission, the Shenzhen Stock Exchange, etc., and have been exposed in the media several times.

Regarding the content of the Yantai partner's report, Vanke explained a few things.

First, the Yantai whistleblower reported the case to the Yantai public security authorities in 2023 regarding Vanke's misappropriation of funds and was accepted. After 3 months of investigation and evidence collection, the Yantai public security authorities decided not to file the case in November 2023.

Second, the Yantai whistleblower reported Yantai Vanke's tax evasion to the tax authorities in 2023. Beginning in September 2023, the Yantai Municipal Taxation Bureau carried out full-process tax inspections on 11 Yantai Vanke projects. Tax enterprises have connected and communicated smoothly. Yantai Vanke has not refused to pay accounts, and Vanke Group has drawn 7 staff from the Beijing region to cooperate with the inspection. All accounts have been submitted to the Inspection Bureau, and relevant supporting materials have been provided one after another in accordance with the inspection requirements. The tax authorities exchanged preliminary inspection opinions with Yantai Vanke. Currently, the tax authorities have not determined that Yantai Vanke had the subjective intention of evading taxes.

“Yantai Vanke will adhere to the principle of seeking truth from facts and actively cooperate. I believe that governments and tax authorities at all levels will make inspection conclusions in accordance with the law and regulations, objectively and impartially.” According to Vanke.

Third, there are no personal interests of the so-called Vanke management team in the cooperative project.

Vanke's management said that the company has been implementing a project follow-up plan since 2014; according to the existing system, Vanke's directors, supervisors and senior management are not allowed to participate in project follow-up investment. Employees participate in follow-up investment. The follow-up plan clearly requires them to share their own capital with the company.

Vanke said that with investment funds, the company's investments and partner investments share risks and benefits, employees and investment rights are all small shareholders. They have equal rights with other shareholders and bear the same shareholder obligations; there is no specificity. Whether it is Vanke's wholly-owned project or a cooperative project, the investment model, terms, and requirements are the same.

It further stated that the follow-up investment system embodies the principles of revenue sharing and risk sharing. In the first few years of Vanke's implementation of the follow-up investment plan, the market conditions were good. The company and partners all received good returns, and employees received the same benefits as investment funds. However, the market situation has changed in recent years, and the income level of the company and partners has declined, and employees have also suffered the same operating results, and some of the follow-up investors have lost money. This reflects the original intention of the team to share benefits and risks with investors.

Fourth, in response to this incident, Vanke has already taken legal action. Vanke said that in response to the economic dispute with the partner, Yantai Vanke Company filed a civil lawsuit in the Yantai court in February 2024 to claim legal rights according to law. The case has entered the formal trial stage, and the court has decided to litigate and preserve the partner's assets in accordance with the law.

Vanke said that the Yantai partner slandered the company and the chairman of the board of directors on the Internet in April 2024. The group is filing a civil lawsuit in court and filing a criminal report with the public security authorities. Regarding the Tangshan Emerald Blue Mountain project reported by the Yantai partner, Tangshan Vanke has reached an execution settlement with the partner in 2022 based on the winning judgment. The compensation assets have been delivered in an orderly manner, and the Blue Mountain project has been operated and constructed normally and delivered with high quality.

In response to the eviction of the general manager of Jinan and rumors related to “border control”

Regarding the removal of Jinan Vanke's general manager Xiao Jin, Vanke's management said that the group had arranged for the Beijing region and Jinan company to communicate the situation with relevant departments and the police investigating the case; the police said that Xiao Jin's removal was a personal case and had nothing to do with the incident reported by Yantai.

In response to recent rumors, after Cai Ping, the head of the Central China region of Vanke, did not return to the US, all Vanke Group vice presidents and above are currently controlled by the border, and Vanke also responded.

In response, Vanke's management responded. The actual situation is that Cai Ping, the former head partner of Vanke Central China, whose child was born in the US, has now reached the stage of receiving education and needs family companionship. He proposed his resignation in 2023 and obtained the company's approval. Meanwhile, Wang Runchuan, the former head partner of the Headquarters Collaboration Center, proposed leaving his job because he went to Hong Kong to further his studies. Currently, he lives in Shenzhen.

Vanke further stated that Vanke Group management's overseas official travel is proceeding normally. Group CEO Zhu Jiusheng just returned from the Hong Kong inspection project today. Group Co-CEO Zhu Baoquan flew to Japan at noon today (April 14) for a business inspection.