The recent turmoil surrounding Vanke and its leader Zhu Jiusheng continues to heat up, with the events at the centre of the whirlpool swirling like a mystery, making it difficult to grasp the truth. The latest rumour is that a special team has been set up in Shenzhen to intervene in Vanke's internal affairs, and the outside world is speculating that Vanke may face a major change, or even a restructuring of its fortunes. Although the truth is not yet clear, Vanke officials have not clarified the situation, and this confusing situation undoubtedly maps out the hidden crisis of the company's governance level.

In fact, this series of furore is not a complete fabrication. Review Zhu Jiusheng's career trajectory, since 2012 to join Vanke, he quickly ascended to the financial company's head of the position, and then it is in 2016 to 2018, concurrently served as the chairman of Shenzhen Pengding Chaungying Financial Information Services Co., Ltd. . However, Pengding Chaungying suffered a shocking thunderbolt in July 2024, and the payment crisis was like hot lava, instantly devouring at least 700 to 800 million yuan of funds. Vanke's deep plunge into the quagmire this time seems to be closely linked to its financial management and supply chain finance pitfalls.

Against this backdrop, the ESG concept of ‘corporate governance’ is particularly important. The basic framework of corporate governance is the four-dimensional structure of shareholders' meeting, board of directors, supervisory board and management, in which the balance of power and mutual checks and balances are the cornerstones for the sustainable and healthy development of enterprises. Corporate governance has long been an insurmountable hurdle in the property industry, and the Evergrande crash is the starkest warning of all. Vanke, since the beginning of the Baowan dispute, has buried the seeds in the field of corporate governance, a ‘bomb’ that may be detonated at any time.

Vanke's story is like a mirror reflecting the fragility and challenges of the real estate market at the corporate governance level. Every fluctuation is not only a test for individual companies, but also a test for the wisdom and resilience of corporate governance. In the ever-changing market, only by establishing a sound corporate governance system can we find a chance to survive in the crisis and create a new situation in the change.

‘Corporate governance’ has been a hidden problem for a long time.

Back in late 2015, a fierce capital game was quietly staged between Chinese real estate giant Vanke and emerging capital giant Baoneng. Baoneng quietly rose to become Vanke's top shareholder by virtue of its successive strikes in the secondary market, and then put forward a proposal to remove Vanke's directors and supervisors, thus igniting the beacon of the ‘Baowan dispute’. This battle is regarded as a struggle for control of the company, and the management of Vanke regarded Baoneng as an uninvited guest, attempting to reject it in the name of ‘hostile takeover’; while Baoneng tried to bring the management under its command to take charge of the company's future course.

In the face of Baoneng's offensive, Vanke offered to increase the strategy, the introduction of Shenzhen Metro as reinforcements, the two camps - China Resources and Shenzhen Metro for one side, Baoneng for the other, opened a three-year-long tug-of-war. This struggle for control has not only shaken the stability of the shareholders' meeting and the board of directors, but also deeply affected the management's decision-making ability. In the end, Vanke's management succeeded in retaining control of the company in 2018, but Wang Shi, the soul of Vanke, quietly retired, and Yu Liang took over the seal and became the new navigator. In January of the same year, Yu Liang led the board of directors to announce Zhu Jiusheng as the new president and chief executive officer, marking the opening of a new chapter for Vanke.

The trigger for the ‘BaoWan dispute’ lies in the fragility of Vanke's shareholding structure, the lack of accurate equity and voting rights planning, coupled with the dispersion of the company's shareholding, the management is in a passive position under the 1:1 voting system. In this regard, industry experts suggest adopting the AB share system, such as Lei Jun of Xiaomi Group, who holds only 24% of the equity, but has absolute control of the company, in order to strengthen the management's decision-making power. Vanke's ‘Baowan dispute’ not only reveals its shortcomings in corporate governance, but also becomes a case of caution for the industry.

Zhu Jiusheng is the new president of Vanke, who has worked for ten years in China Construction Bank, serving as vice president of the Futian branch and specialising in credit business. Since joining Vanke in 2018, the company's total liabilities have jumped from 0.98 trillion yuan to 1.32 trillion yuan, and then climbed in successive years to 1.55 trillion yuan in 2021, with a debt ratio as high as 79.9 per cent. Under Zhu Jiusheng's leadership, Vanke not only borrowed to expand its debt, but also actively laid out supply chain finance, with Pangding Chuangying as its joint venture.

During Zhu Jiusheng's tenure as chairman of the company, he launched the ‘Pengjinxin’ property investment loan project in early 2017, in an attempt to innovate the financial model. However, in July 2024, the explosion of Pang Ding Chuangying once again put Vanke's corporate governance at the forefront of public opinion, triggering widespread questions in the market about Zhu Jiusheng's ability to assess the risk of a series of decisions, as well as the Supervisory Board's supervisory responsibilities are in place.

Doubtful Governance Structure for ‘Sunny’ Vanke

In its ESG blueprint for 2023, Vanke highlights the rigour and standardisation of its corporate structure, which paints a picture of an operation that follows the Articles of Association, with each actor - the General Meeting of Shareholders, the Board of Directors, the Supervisory Board and senior management - performing their respective roles rigorously, like actors and actresses on a stage, interpreting a harmonious chapter of corporate governance. Each of these roles - the General Meeting of Shareholders, the Board of Directors, the Supervisory Board and senior management - performs their respective duties rigorously in their positions, just like actors on a stage, performing their respective roles in a harmonious chapter of corporate governance. The Supervisory Board, as the guardian of financial health, strictly examines and supervises every step of the Board of Directors and senior management in accordance with the law. Through close inspection, it not only strengthens the monitoring of the business of subsidiaries, but also builds a solid defence for the common well-being of the company, its shareholders and employees. Vanke, with practical actions, is actively responding to the market's questions about its governance capability, aiming to rebuild investors' trust, write a new chapter of corporate governance and turn a page of new history.

In the course of ethics and compliance, Vanke has formulated a guideline called ‘The System Illuminated by Sunshine - Red Line Requirements for Vanke Employees’, which is a declaration of ‘no’ to any form of fraud, commercial bribery and conflict of interest, and emphasises ‘zero tolerance’ for non-compliance. It emphasises a ‘zero tolerance’ attitude towards non-compliance. At the same time, Vanke has strengthened its internal risk prevention and control, and tightened its whistle-blowing mechanism, which is like lighting a lamp in the dark night, illuminating the way forward.

However, at the beginning of spring in 2025, Vanke's sunshine governance was severely tested. In addition to the news of the palm trustees being taken away from the company was flying all over the place, the capital market's reaction was also rapid and fierce. Recently, a number of Vanke's listed bonds, like ships caught in a storm, continued to sink until 16 January 2025, when five domestic bonds were forced to suspend trading due to a drop of more than 20%. To date, the prices of these listed bonds are all significantly lower than their nominal values, with the prices of 20Vanke02, 21Vanke02 and 22Vanke02 dropping to RMB 83.389, 54.569 and 46.406 yuan, like a mourning.

Industry winter, performance losses and mismanagement of the triple blow, Vanke's market value as autumn leaves, declining, Shenzhen Metro, the former ‘white angel’, bear a heavy price. 2017, Shenzhen Metro to the price of 22 yuan per share to take over 1.689 billion shares held by Huarun, and then to the price of 18.8 yuan per share to buy the shares of the company, and then to the price of 18.8 yuan per share to buy the shares of the company. 18.8 yuan price of 1.55 billion shares of Evergrande, a move to become the largest shareholder of Vanke. However, to date, according to the latest price of 6.85 yuan per A-share, the cumulative loss of these two transactions reached a staggering 44.111 billion yuan, like a financial tsunami, with far-reaching consequences.

In the midst of the storm, Vanke's debt problem has once again become a focus in the eyes of regulators, Bloomberg cited people familiar with the matter as revealing that the Shenzhen Municipal Government convened a closed-door meeting on Vanke on 17 January 2025 to express its determination to maintain Vanke's stable operations, and that the official plans to bring in new auditing forces and financial advisers to comprehensively assess Vanke's real-estate projects and asset status, Shenzhen Metro, which as the largest shareholder, is expected to play a key role in providing solid support in this series of adjustments.

Vanke's case is not an isolated one, and the furore caused by neglecting corporate governance, as demonstrated by Sheung Shui Cement and Southern Manganese, has played out frequently. These incidents remind us that sound corporate governance is the cornerstone of sound corporate development. Neglecting it is like a ship that has lost its course in the storm and may be attacked by the elements at any time. In the pursuit of profit and development, enterprises must always be vigilant and take Vanke and other cases as a lesson to reshape the new paradigm of corporate governance, in order to sail steadily in the turbulent business sea and arrive at the other side of the ideal shore.

Editor's Notes:

Vanke's board turnover, like a war without smoke, has stirred up the calm lake of the governance structure and brought about a series of chaos. At the same time, the irrationality of remuneration and equity incentives is like opening Pandora's box, luring professional managers to embark on a rent-seeking road of no return. The consequences of the lack of governance are not only the erosion of the brand, but also the damage to the market capitalisation and fundamentals. The story of Shanshui Cement is another version of this tragedy, reminding all enterprises that improper governance is just like planting a time bomb that may detonate at any time.

Corporate governance, as a core aspect of the ESG (environmental, social and governance) framework, has attracted much attention in recent years. It has become fashionable for listed companies to publish ESG reports. However, we should be wary of the pitfalls of formalism, and substance over form is the true meaning of ESG construction. This is a long-term and arduous task, just like nurturing a seedling, which requires time and patience to see it grow.

The cases of Vanke and Shanshui Cement are like two mirrors reflecting the complexity and importance of corporate governance. They warn us that while pursuing corporate development, we should not neglect the improvement of governance; otherwise, just like a ship that loses its helmsman in the stormy sea, it may lose its direction and fall into the abyss of crisis at any time.

On the journey to the future, enterprises should regard corporate governance as a bridge connecting the present and the future, stability and prosperity. Only by building the cornerstone of governance can they ride the waves and move forward steadily in the business sea. This is not only a deep reflection on Vanke and Shanshui Cement, but also a solemn reminder to all enterprises.

Author: Princess