LONDON (Reuters) – S&P Global downgraded China Vanke, the second-largest property developer in China, to junk status, signaling further trouble for the country’s struggling property sector. The credit rating agency slashed China Vanke’s rating by three notches to BB+, citing weakening competitive position and rising leverage. This move comes as the latest blow to the Chinese property market, which has been grappling with a sustained downturn.

The downgrade reflects concerns about China Vanke’s ability to maintain sales and margins, with S&P projecting a significant drop in contracted sales over the next few years. The agency estimates that the firm’s contracted sales could decline by 25%-28% from the previous year and by a staggering 60% from the peak levels of 2020.

Moody’s and Fitch had previously downgraded China Vanke, and S&P’s latest action underscores the deepening challenges faced by the company. The subsidiary, Vanke Real Estate (Hong Kong), and the issue rating on Vanke HK’s senior unsecured notes were also downgraded in line with the parent company’s rating adjustment.

While China Vanke is expected to meet its debt obligations for the current year, the outlook remains bleak as the property market continues to struggle. The successive downgrades by major credit rating agencies reflect the broader concerns surrounding the Chinese property sector, which has been under pressure due to a sustained market downturn.