China Vanke, once the country's largest home developer, is no longer too big to fail.
As the state-backed property giant buckles under the weight of its debt, the government has so far refrained from stepping in. Analysts say that sends a clear message: Beijing isn't coming to the sector's rescue.
Vanke, which has about $170.43 billion in assets, is set to become the latest domino to fall after the Shenzhen government abruptly reversed its position on a partial bailout of the developer. Many of China's other large developers have already defaulted, and a Vanke collapse would raise questions about how policymakers plan to address the real-estate slump as it drags on into a sixth year in 2026.
Given the heavy weighting on household balance sheets, letting the crisis continue unabated will keep consumer sentiment weak and weigh on consumption.
Analysts at Morgan Stanley see little chance of any more bailouts, in part because the government doesn't want to be seen as rewarding developers that took on too much debt.
Signs from the top reinforce that view.
When China's leadership gathered earlier this month to set policy priorities for 2026, the property sector was pushed down the agenda. The readout from the meeting also removed language in last year's communique calling for efforts to "stop the decline and return to stability" in the real-estate sector.
Dominic Soon, head of APAC credit research at Debtwire, doesn't expect to see any property stimulus boost next year.
"We have seen the government announce a variety of measures but with limited effect," he said.
Given the significant amount of money needed to rescue the property sector--which at its peak accounted for roughly 25% of gross domestic product--Morgan Stanley analysts expect fiscal-backed support to remain restrained, with officials sticking to a piecemeal approach.
Beijing is still encouraging regional authorities to bring down the glut of unsold real-estates projects by turning them into affordable housing, but analysts at Gavekal Dragonomics say the slow progress seen so far shows that the incentives aren't strong enough.
"There seems little chance of substantial interventions to contain the continued decline in property sales and prices," they wrote in a note.
Instead, Beijing appears to be betting that exports will continue to support growth, while a booming stock market and other policy measures, like consumer subsidies, can lift sentiment. But analysts say policymakers risk underestimating the persistent weakness in the property sector if they want to boost domestic demand to offset the threat of external shocks.
"Given the widespread ownership of property and the spillovers to upstream and downstream sectors, we think the sustained tumble of the property market will continue to reinforce the negative feedback loops between property and the macroeconomy, labor market and deflation expectations," economists at Barclays said.
Debtwire's Soon said policymakers also need to consider the longer term, secondary effects of a "new lower-level normal" for the property sector, and how that will impact construction starts, the workforce involved and domestic consumption.
"If you were a homebuyer, you'd hold off on buying a new house until you knew that home prices have at least stabilized and the developer doesn't default, leaving you with an unfinished home," he said.
He noted that authorities recently asked two housing-data providers to stop publishing monthly sales figures, which doesn't inspire much hope that conditions are improving.
Still, economists say that unless China's overall growth slumps, policymakers are likely to continue drip-feeding support to the sector, mitigating risks instead of bolstering growth.
Economists at Pantheon Macroeconomics think 2026 will see more of the same type of targeted policy measures. That could include mortgage rate subsidies, though similar moves trotted out in cities like Wuhan and Changchun indicate that this would lead to only a limited sales boost at best, they said.
Without consistent government support, a real-estate turnaround will remain out of reach.
Previous rounds of easing show that while any fresh stimulus may lift fragile sentiment in the short term, stabilizing the housing market will require consistent, concerted policies, Morgan Stanley analysts said.
Write to Singapore Editors at singaporeeditors@dowjones.com
(END) Dow Jones Newswires
December 22, 2025 03:16 ET (08:16 GMT)
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