As China’s biggest property developer, Vanke’s fame comes not only from its brand and credibility, but also its reputation and management culture. In terms of the company structure, however, Vanke emphasizes decentralised ownership, and prior to the end of 2015, China Resources was Vanke’s biggest shareholder with only 15% of shares,. It’s not uncommon in the West, but in China where the competition for capital is fierce, its scale varies between small and large investors. and this shareholding structure became vulnerable to an assault by capitalism.
As recently as a month ago, a hostile takeover battle eventually started, following aggressive purchases of Vanke’s shares by Baoneng Group and Foresea Life Insurance actually occurring since July 2015. On 10 July Foresea Life Insurance increased their holdings to 5% (122 million shares) at a cost of $379 million (RMB 1.895 billion). It triggered Baoneng Group’s strategy. By purchasing 548 million shares between July and December and another 270 million shares on the 11th and 12th of December, Baoneng Group confidently displaced China Resources and became Vanke’s largest shareholder holding a 22.45% stake.


Wang Shi, the chairman of Vanke, gave a talk within the company on 17 December 2015. The
full transcript is as follows:
Greetings to you all! In relation to the change in Vanke’s largest shareholder from China Resources to Baoneng Group, I am going to give you some background information and, reactions from other large shareholders, and executive Yu Liang as well as my own opinions.

I had a meeting with Mr Yao, executive of Baoneng Group, when Baoneng owned 10% of Vanke’s shares. The meeting went for four hours from 10pm to 2am. Since it was our first meeting, I wanted to show my respect to him and wanted to see what kind of person he is. Mr Yao was very talkative and told me how he got to where he is today. He also expressed his admiration for me implying that irrespective of who’s the largest shareholder, I’m still the boss of Vanke and always will be.

However my point today is to tell you what I told him that night. I told him that we were flattered that Baoneng Group had chosen to purchase our shares but I do not welcome them as our largest shareholder. He was shocked.

My reason is simple – their credibility is questionable. Vanke is a publicly listed company. It is impossible for us to choose each of shareholders, however it is our responsibility to all shareholders regardless of whether they are big or small, to provide guidance in choosing our largest shareholder.

Over the years Vanke has built a reputation of diversified shareholdings and trust from many small to medium shareholders because we have an effective, systematic structure and team. Now funded by a large debt, Baoneng is becoming the largest shareholder and may even be privatised in the future. It will jeopardise Vanke’s credibility – the most valuable asset Vanke has. Actually when Baoneng increased their shareholding to 5%, I posted a message on WeChat:“Businesses from Shenzhen know each other inside out”. Why? Back some years ago Vanke had a project to develop a beach sports centre, one of the projects in preparation for hosting a national sport-ing event. After the event, the centre was auctioned and it was well known that Vanke had intentions to buy it. However Baoneng won the auction with a bid ten times higher than its reserve price. Frankly we didn’t understand this risky, irrational business behaviour. Now the centre is vacant.

Here is another piece of information about Baoneng Group’s success. Baoneng became a shareholder in Shenzhen Logistics in 2003 and increased their shares to 40% within a few years.

In 2006 Shenzhen Logistics divested its brand to Baoneng. This was how they achieved their increased capital.


Based on the above reasons, I don’t welcome them. All assets listed on Vanke’s books are important to Vanke but the biggest asset out of all of them is Vanke’s credibility. Being controlled by Baoneng will negatively impact on Vanke’s standing amongst larger investors, financial institutions and business credit ratings authorities. As we all know, Vanke’s credibility ranking by international authorities is the highest in the world property industry, which means that we have the lowest financing costs. With Baoneng joining us in the boardroom, Vanke’s credit ratings will be jeopardised.

At the meeting I told Mr Yao that it might be sometime in the future, who knows, but at present, with the poor credit system and transactions of only a few billion RMB last year, part of which were indirect sales, Baoneng Group doesn’t qualify to be the biggest shareholder and lead Vanke.

Here’s another key point. How did Baoneng fund the purchase of Vanke’s shares? They funded their first big purchase from short term debt. Although Vanke’s shares – just like other shares on stockmarket – can be purchased and sold at any time they want, however, for any holding of more than 5% in a company, it is no longer a short-term investment but long term equity. Long-term investment with short term debt involves significant risk. How can I welcome a big shareholder like this? Since Baoneng’s aggressive purchase up to 20%, thesituation has become even worse. They continued buying even after we requested that trading on the stockmarket be suspended. Yu Liang and I both clearly agreed to keep Vanke’s management free from Baoneng as much as possible. They have debt at every level, at every turn – it’s like rolling a snowball. Once one thing goes wrong, the whole thing collapses in the same way 60 American life insurance companies went bankrupt in 1990. With the size of Vanke and the fact that Baoneng continued to buy after the share value rose to the limit and the shares were suspended, it’s no longer a sensible investment strategy but a gamble.

It’s Baoneng’s choice if they want to gamble their business, but it becomes our business if they want to jeopardise Vanke’s brand and credibility. Therefore we do not welcome them and Vanke’s management team does not want a shareholder like them.

At the meeting, we mentioned China Resources. Mr Yao asked me how I was sure that China Resources would maintain position as the largest shareholder. I replied that I can’t be. He then asked if the reason for accepting China Resources instead of them was that we didn’t approve of Baoneng’s management. If that’s the case, he said they could do the same by keeping Vanke’s management team. I shook my head and told him that they had no idea of Vanke and even less idea of China Resources.

First, China Resources played a very important role in the company’s management when they were Vanke’s largest shareholder. They recommended many outstanding independent directors to form a board that represents all shareholders, particularly the small to medium shareholders.

One of these recommendations was Charles Li, the current executive officer of the Hong Kong Stock Exchange. He was Vanke’s independent director before he was offered the job at the Hong Kong Stock Exchange. Another example was Paul Chan Mo Po, the head of the Hong Kong Society of Accountants. He was an independent director before he was offered a job in the Hong Kong Government. He has a very good reputation and is outstanding in his field. Examples like this go on and on. Vanke’s management and governance have been underpinned by high profile lawyers, accountants, professionals and well-respected figures recommended by China Resources and have played important roles in Vanke’s leadership. Mind you, they were recommended by China Resources but they were not from China Resources therefore they did not represent China Resources. The recommendations showed that their sense of responsibility to Vanke and all of Vanke’s shareholders.

Second, China Resources is an international company with a strong background and good credibility. In business they interacted with Vanke in many areas which provided stability in Vanke’s shareholding structure, business management and internationalization.

With respect to this takeover battle, I understand that Vanke’s employees have concerns about Vanke’s future. I have some opinions to share with you. It is Vanke’s team and 40,000 employees who have built Vanke’s credibility and reputation and are maintaining it by providing top class services. We are not perfect and we still have room to improve.

We should take the change as an opportunity to hold together and do a better job. As your chairman, it is the 40,000 employees that I care about. Vanke provides not only products and services, but also positive influences like pride and trust that help society progress. In the worst scenario, if Vanke is privatised, what we care about and treasure will not change. We need to be responsible to our customers, to society, to properties we have sold, to suppliers and to the promise of green buildings to save the environment. We need to remember our goals to maintain our key business in residential and commercial building while extending
to property management services, small community businesses, nursing homes, education and logistics and lead China’s housing industry. We need to remember our spirit – a healthy lifestyle, caring and respectful no matter who our biggest shareholder is. We can’t let it be just because we don’t like our new biggest shareholder and forget the people who have had trust in us.

Now is the best time for Vanke with the management team led by CEO, Yu Liang. This is a young energetic team with outstanding expertise that has been underscored by the success it has achieved in recent years. This is only the beginning. Someone asked what are we going to do if Baoneng owns up to 20%; now I’m giving you the answer. In reputation Vanke’s brand has already been built with China’s unchanged open policy and reform and our unchanged spirits, we will do our jobs as well as possible and we will have the future in our hands regardless.


Baoneng Group was founded in Shenzhen and is currently led by businessman Mr Yao Zhenhua from Chaoshan, a city next to Shenzhen. This company was unheard of by many until last year when it started aggressively purchasing shares in Vanke with its alliance partners such as parent company Jushenghua, and Foresea Life Insurance.

By using multiple accounts to purchase the shares, they successfully avoided the duty of disclosure required by regulators.

In response to Wang Shi calling it a “barbarian invasion”, Baoneng issued a statement on 18 December saying that Baoneng is a company strictly abiding by all laws, respecting regulations and rules and believing in market forces.

At the 4th Finance Development Strategy and Consultation Committee meeting, held in Shenzhen on 23 December, when asked by Mr Xu Anliang, Shenzhen’s deputy mayor, about the takeover battle between Vanke and Baoneng, Mr Yao responded that it wasn’t actually as intense as it may appear through the media and emphasized that there was always good communication between Vanke and Baoneng. “Mr Wang Shi is a reputable and outstanding businessman in the property industry. I have always looked up to him” said Mr Yao. This was also the first time Mr Yao or Baoneng had commented on the battle.

On the same day, in response to some comments from social media about Mr Yao’s history of selling vegetables, he didn’t take offence but corrected the comments confidently with a little humour that it wasn’t just vegetables, but franchised supermarkets.

Due to the introduction of a new idea, the supermarkets had grown quickly. The next day, a spokesperson from Baoneng said that their intentions in this matter were genuine and in good faith. They never meant to hurt Vanke.

On 17 December, another spokesperson from Baoneng responded to the question of their credibility that there were some negative opinions about Baoneng at present. The intention was to deliberately defame Baoneng and the comments were not true. Over all these years Baoneng believes in keeping promises, controlling leverage, as well as stable operations, control of risk and capital safety. The spokesperson said that in the 23 years we have been operating we have built a good record of credibility and never over leveraged. In the future Baoneng will disclose all the information required by law and regulations to meet the public and media’s right to know.


On 18 December, Vanke requested the temporary suspension of its shares from the Hong Kong and Shenzhen stock exchanges due to a planned share issue for acquisitions. This capital restructuring plan is to serve the purpose of diluting Baoneng’s shareholding. At the same time, it also increases the acquisition cost for Baoneng with its rising share value.

In this battle, Anbang Insurance with a 7.01% shareholding, has become an important card for both Baoneng and Vanke. Whether it is Baoneng’s alliance partner or Vanke’s ‘white knight’ still remains a mystery. Some sources suggested that Anbang Insurance was more likely to be Baoneng’s saviour. At midnight on 23 December, the battle took a big turn when Vanke announced that they warmly welcomed Anbang Insurance as an important shareholder. Immediately following this statement,
Anbang Insurance published a similar announcement.

Both parties showed a cooperative and supportive attitude to each other. These two statements unlocked the mystery. It means that there is quite a gap for the Baoneng Group to own 30% of shares and to be the controlling shareholder.

It also means that this battle will become Vanke and Anbang versus Baoneng. However does it mean that the battle is finished? We will have to wait and see.

This takeover battle is a battle between money and people. Is it particular to China? What do Australians think about this? We look forward to your opinions.


Mr Wang Shi founded Vanke in 1984 under the Shenzhen Special Zone Development Company. (‘Shenzhen Development’) In 1988 Vanke was listed on the stockmarket with 60% of its shares held by the State. Shenzhen Development became the biggest shareholder with 30% while Mr Wang Shi gave up all his shares and was employed as General Manager by Vanke. Due to the fact that the founder had no shares therefore no control, ownership changed regularly.

After a set of reforms, Vanke increased their share issue four times and Shenzhen Development’s shareholding was significantly diluted to under 10% from which the foundation of Vanke’s independent diversified shareholding structure emerged.

In August 2000, Shenzhen Development sold all their shares to China Resources and related parties.

As a result, with a 15.08% stake, China Resources became the biggest shareholder. A plan to merge China Resources and Vanke was considered in order to hold more than 50% of the shares and be the controlling shareholder. However it was opposed by Vanke’s institutional shareholders and public investors.

Therefore China Resources retained their 15.08% shareholding as a silent investor.


Founded in May 1984, Vanke is one of the biggest property development companies in China. It entered the real estate industry in 1988 and in 1991 became the second company to list on the Shenzhen Stock Exchange . Vanke was the only real estate company out of ten companies elected in “the Best Employer Award” in 2009.


Founded in 1992, the headquarters of Baoneng is located in Shenzhen Special Zone. The company has experienced stable growth for over 20 years.Baoneng is a company specializing in international logistics, comprehensive development, culture and tourism as well as finance and insurance. They also have supporting business activities in health and community wellbeing industries.