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Vanke, one of China’s leading property developers, said it would cut its debt by $14bn after a nationwide slowdown in the sector hit its sales and saw its profits fall by almost half in 2023.

The company’s net income fell 46 per cent to Rmb12.2bn ($1.69bn) last year, the state-linked company said in an exchange filing late on Thursday. In February, its sales dropped by 53 per cent year-on-year to Rmb14bn.

Separately late on Thursday, fellow developer Country Garden, which defaulted on its international debts in October, said it would delay the release of its annual results for 2023 beyond a deadline of March 31 and expects its shares to be suspended when trading resumes after Easter. It is not clear when the results will be released.

The struggles of both companies, once seen as among the most trusted real estate developers in China, highlights the impact of a two-and-a-half-year cash crunch that has weighed on construction and the wider economy.

Yu Liang, Vanke’s board chair, told a press conference on Friday morning that the real estate market is “oversold” in the short term and that the industry’s prospects are still “broad”, according to local media reports.

Vanke’s commitment to cut debt by Rmb100bn over the next two years aligns with a long-standing push from Beijing to deleverage the real estate sector. In 2021, its so-called “three red lines policy”, which set leverage guidelines for developers, added to funding pressures that ultimately toppled Evergrande, the world’s most indebted developer.

The failure of the company, which is now the subject of a liquidation order in Hong Kong, led to a wave of other defaults by Chinese developers, particularly on their international debts which had accrued as part of a decade-long borrowing binge. Evergrande failed to reach any restructuring agreement with international creditors.

Country Garden in February said a winding up petition had been brought against it in Hong Kong for failing to repay a $205mn loan. 

Vanke, which is partly owned by the state-owned metro in the city of Shenzhen, became the focal point of the sector’s troubles in March after rating agency Moody’s, which estimated a severe decline in its sales in January and February, removed its investment grade rating. It was later downgraded by Fitch.

Andrew Lawrence, an analyst at TS Lombard, earlier this month said that Vanke, similar to Country Garden, had a business model that was vulnerable to “an interruption in its ability to generate sufficient presales to meet its short-term liabilities”. Property developers in China typically sell homes before they are completed.

Beijing has so far emphasised the need to complete unfinished housing and has stopped short of any overt bailouts of property developers.