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By Clare Jim, Ziyi Tang, Kane Wu
HONG KONG (Reuters) -After numerous measures to resolve a liquidity crisis in the property market in recent years, Beijing is expected to end up dusting off an old playbook and step in directly to stabilise a state-backed developer seen as a bellwether for the sector.
With the crisis in the sector entering its fifth year, concerns about the financial health of China Vanke pose fresh challenges for the authorities, who have so far avoided the moral hazard of bailing out a debt-laden developer.
Vanke's crisis came into focus last Thursday after a state media report alleged that its CEO had been detained and that it could be subject to a takeover or reorganisation. The report was deleted within hours of its publication.
Vanke, backed by state-owned shareholder Shenzhen Metro, declined to comment on the media report.
All three global rating agencies have downgraded the developer deeper into junk since the media report, citing its eroding financial flexibility and an uncertain sales outlook for 2025.
Worries over Vanke's repayment ability intensified this month amid looming debt maturity deadlines - its next yuan repayment deadline is Jan. 27, while it has a total of $3.4 billion due this year.
The government in the southern city of Shenzhen, where Vanke is headquartered, is stepping up meetings and coordination with local state enterprises on plans to contain the company's debt risk and on asset disposals, said two people with knowledge of the matter.
Vanke, whose interest-bearing debt stood at 331.3 billion yuan ($45.21 billion) as of the end of last June, is still trying to sell stakes in logistics platform GLP, property management unit Onewo, rental apartment businesses and shopping malls, among others, said two separate people close to the company.
The sources declined to be named as they were not authorised to speak to the media.
Vanke declined to comment. The Shenzhen government and Shenzhen Metro did not immediately respond to requests for comment.
One of the best-known household names in China with many projects across bigger cities, Vanke is around a third owned by Shenzhen Metro.
It had previously been viewed as immune to the property market turmoil which saw China Evergrande, the world's most indebted developer with over $300 billion in liabilities, ordered into liquidation last year following its offshore debt default in late 2021.
Analysts now express concern that Vanke's problems could be the last straw for homebuyer confidence, which has shown signs of stabilizing in the past few months, and that banks could further shut financing to the sector, squeezing developers that have not defaulted.