A major leadership overhaul cannot resolve the crisis at Huafa Group.

(Source: Source Media)

Author | Li Jin

The turbulence at Huafa Co., Ltd. continues.

Reports indicate that Huafa’s Chief Design Officer and General Manager of the Design Management Center, Huang Fengbin, along with the General Manager of the East China Region’s Design Department, Kang Boya, have both recently left the company. Earlier, the General Manager of the Marketing Management Center, He Chuanlang, and the marketing head for Huafa’s Xi’an branch in East China, Bu Yanan, also resigned.

The significant turnover among Huafa’s executives began as early as January 2025. At that time, Zhang Xuebing and Xie Gang resigned from their positions as independent directors and members of the Strategy Committee; in April, Yu Weiguo and Zhang Chi stepped down as Executive Vice Presidents of Huafa, and Luo Bin resigned as Chief Financial Officer; in May, Li Guoning, who had led Huafa for over a decade, resigned as Chairman of the Board; in June, Zhang Yan resigned from his roles as Director and Executive Vice President; in October, Zhang Wei resigned as Executive Vice President, serving a brief tenure of only six months.

Among the aforementioned departing executives, apart from Li Guoning taking a position as a director and manager at the newly established Zhuhai Technology Industry Group formed by Huafa Group and Gree Group, most cited “personal reasons” for their departures.

The upheaval in personnel has not yet settled, and shortly after, explosive news followed. According to reports from Caixin and International Financial News, in June 2025, Zhang Yan was taken away for investigation, followed by Li Guoning and Zhang Wei. However, Huafa publicly denied the related news, stating their resignations were due to personal reasons.

Currently, the personnel turbulence at Huafa is cascading downwards. The frequent departures among mid- to senior-level management are behind Huafa’s report of a massive loss—projected net profit loss attributable to the parent company for 2025 is expected to range from 7 billion to 9 billion yuan, with net profit loss attributable to the parent company after excluding non-recurring items estimated at 5 billion to 7 billion yuan.

It wasn’t until the massive losses appeared that Huafa began its organizational restructuring, splitting the East China region and placing it directly under headquarters management in early 2026.

However, the historical issues left behind cannot be cured merely by a turnover in executives or organizational restructuring; the turbulence at Huafa is far from over.

“Crossroad Gang” Seeks External Assistance

Unlike high executives such as Li Guoning, Zhang Yan, Zhang Wei, and Yu Weiguo, Huang Fengbin, Kang Boya, and He Chuanlang have always been considered “outsiders” within the Huafa system.

Within Huafa, the core executives represented by Li Guoning, Zhang Yan, and Zhang Wei are privately referred to as the “Crossroad Gang” due to their careers being closely tied to the Huafa Zhuhai Crossroad Central Business District project, which is also seen externally as the “incubator for Huafa executives.”

This includes Guo Lingyong, who is currently succeeding Li Guoning as Huafa’s top leader, having also served as the general manager and chairman of the project company.

In 2012, at the young age of 40, Li Guoning was nominated by former Huafa Group Chairman Yuan Xiaobo to become the new chairman of the group, and two years later, he also took on the role of chairman of Huafa’s board. Thus, Li Guoning became a well-known figure in Zhuhai. In comparison, Dong Mingzhu took over Gree Electric at the age of 58.

Returning to the earlier question, why are Huang Fengbin, Kang Boya, and others still considered “outsiders”?

The reason is also related to Li Guoning’s style of employing people. An insider from Huafa Group revealed to the media, “Huafa Group is accustomed to promoting from within, so the area of professional managers is relatively weak, and a systematic training framework has not been established.”

This “tradition” was only broken around 2020. At that time, the real estate industry had just entered a period of adjustment, and Huafa emerged as a “dark horse.”

When the “three red lines” policy was introduced in 2020, Huafa, which had two lines marked in red, invested over 70 billion yuan in land, ranking among the top 15 in the industry; after a brief contraction in land acquisition in 2021, Huafa became active in the land market again in 2022 and 2023, spending approximately 30 billion yuan on land each year, placing it among the top 10 in the industry.

Expanding territory corresponded with hiring, and during this time, external professional managers represented by Huang Fengbin, Kang Boya, and He Chuanlang gradually joined Huafa.

For example, He Chuanlang, who came from China Overseas Property marketing, became the general manager of Huafa’s marketing department in 2021; Huang Fengbin, who had worked at leading real estate companies such as Wanda, China Resources, and Sunac, took the position of Chief Design Officer at Huafa in the second half of 2022.

At the regional company level, aside from Kang Boya, who came from Poly, mid- to senior-level executives like Shao Changkui, Wang Xiaofeng, Chen Shuangquan, and Lin Zidong, all with backgrounds from mainstream real estate companies such as New Town, China Overseas, Sunshine City, and Agile, joined Huafa.

These externally recruited professional managers share a clear characteristic: they are concentrated in the real estate development business.

Huafa’s initial counter-cyclical expansion achieved immediate results, with sales exceeding 100 billion yuan from 2022 to 2024, and it surged from over 30th place to the top 10 in the annual rankings of the top 100 real estate companies by CRIC; it still achieved sales of 78.56 billion yuan in 2025, ranking 11th.

However, the cost was equally significant. In fact, before the aggressive expansion, Huafa had already maxed out its leverage, as mentioned earlier, the company had two lines marked in red in 2020, and at that time, the amount of external guarantees due to off-balance sheet liabilities reached 98.66 billion yuan, accounting for 155.75% of net assets.

Relying on its state-owned background in Zhuhai, along with gradually loosening regulations, especially the lifting of the ban on private placements for listed real estate companies in 2022, Huafa benefited from financing dividends—since 2020, it restored liquidity through targeted tools, medium-term notes, and corporate bonds, raising 6 billion yuan through private placements in 2023, buying itself some time.

Entering 2024, the recovery of the commodity housing sales market was not as expected, indicating that Huafa faced severe inventory accumulation issues amid its counter-cyclical expansion. By the third quarter of 2024 and 2025, Huafa’s inventory was 248 billion yuan and 225.9 billion yuan, respectively, both showing a year-on-year decrease of less than 10%. This was still a result of Huafa compressing its land investment scale to 7 billion yuan over these two years.

Thus, in 2025, Huafa could no longer hold on and reported massive losses.

Do Minority Shareholders Bear the Debt?

In reality, however, Huafa’s issues have been building for a long time.

On the surface, Huafa’s net profit and net profit attributable to the parent company seemed to follow the industry’s cyclical rise and fall trends over the past decade before 2025, but in essence, this may be a facade, a result of Huafa’s “beautification.”

When Huafa began its counter-cyclical expansion in 2020, its chosen method was cooperative development, leaning towards small equity participation or management. The equity assets rose from 43.3 billion yuan in 2019 to 121.5 billion yuan in 2025, but shareholder equity remained around 20 billion yuan, with its proportion of the total falling from 45.6% to 15.6%.

Calculating the return on equity, a significant gap persists between the diluted return on equity of the shareholders and that of the minority shareholders. Especially before 2023, shareholder equity generally exceeded 13%, while minority shareholders only had a meager 2% to 4%.

From 2020 to the third quarter of 2025, Huafa’s interest-bearing debt ratio ranged between 31.9% and 49.3%. On one hand, there was a continuously rising minority shareholder equity, while on the other, the interest-bearing debt ratio showed some decline; comparing the two, it can be inferred that Huafa had a situation of “visible equity, hidden liabilities,” essentially transferring on-balance sheet liabilities off-balance sheet.

In simpler terms, minority shareholders partnering with Huafa are not doing so to make money, but rather to help it bear debts. There are two possibilities: one is that there are truly “benevolent” partners; the other is that Huafa is suspected of manipulating profits through minority shareholder equity.

At the third-quarter earnings meeting in 2025, Huafa revealed that at the end of the reporting period, of the 102.5 billion yuan in minority shareholder equity, more than 30% was held by Huafa Group.

After the significant turnover of core executives at Huafa, the truth gradually surfaced. Since the launch of counter-cyclical expansion in 2020, Huafa’s executive compensation has risen significantly, soaring from 49.97 million yuan in 2019 to 67.56 million yuan in 2023, then dropping to 32.55 million yuan in 2024.

During this time, Huafa’s executive compensation consistently outpaced that of the newly crowned “real estate king,” Poly Development.

The reason is that Huafa has a much larger executive team: in 2024, it had a total of 12 core executives, including the chairman, secretary, three vice chairmen, and six executive vice presidents (not counting those who have left). Meanwhile, Poly Development, China Merchants Shekou, and Jianfa Holdings had 9, 8, and 9 core executives, respectively.

Two details worth pondering are: first, some of Huafa’s executives also hold positions in other units within Huafa Group. For instance, Li Guoning is with Huafa Group, and Guo Lingyong is with Zhuhai Jiuzhou Holdings, yet they draw salaries from Huafa.

Second, before the delisting and merger of Huafa Property into the Hong Kong stock market in 2024, Huafa’s operational focus leaned towards real estate development. So, how do many executives divide responsibilities for just this one business?

Unchanging “Base Color”

However, these issues may be addressed during the significant turnover of Huafa’s executives.

Based on information from Wind and Eastmoney regarding executive member introductions, the current number of core executives at Huafa is only 6, including Chairman Guo Lingyong, Vice Chairman and Executive Vice President Liu Yingzhe, President Xiang Yu, Executive Vice President Dai Geying, Executive Vice President and Board Secretary Ye Ning, and Chief Financial Officer Yang Yongjun.

Moreover, many members of the “Crossroad Gang” are noticeably absent.

Liu Yingzhe comes from Longhu and Taihe, joining Huafa in 2019; Xiang Yu worked at Huafa for several years before moving to Huaxia Happiness, then returned to Huafa in 2022; Dai Geying has a background from Jindi and Fudi Group, invited to join Huafa in 2015, rising from being the head of the East China region to Executive Vice President.

After finalizing the core executives, Huafa first merged the four major regions of East China, South China, Zhuhai, and Northern into the South China region (including Guangzhou, Shenzhen, Southwest, Central China, and Zhuhai), and East China region in November 2025.

In January 2026, Huafa further split the East China region into three major areas—Suzhou, Zhejiang, and Northern—under direct management by headquarters, while the Xi’an company, originally part of the East China region, was combined with the Chengyu company to form the Western region.

The goal is simple: streamline the structure and reduce the layout.

However, Huafa still overlooks a critical issue: it has not changed its real estate-centered focus.

Currently, the career backgrounds of Huafa’s core executives have one commonality: they lean towards real estate development and financial management. It can also be understood that Huafa’s core task at present may be to resolve current inventory issues, develop existing land, and create space for liquidity.

In the financial report for the period ending in 2025, Huafa did not disclose any data on real estate development investments. By the end of 2024, the company had a total construction area of approximately 13.468 million square meters for newly started and ongoing projects, with an ongoing area of about 8.14 million square meters, and total investment amounting to around 256.4 billion yuan, with actual investment during the reporting period of about 25.6 billion yuan.

The pressure to liquidate existing land reserves remains significant, with a considerable funding gap.

Thus, on one hand, Huafa is exploring new avenues, beginning negotiations with local governments for land repurchases, with plans to repurchase seven commercial plots in Shenzhen for 4.405 billion yuan in July 2025; on the other hand, it continues to leverage its state-owned background in Zhuhai, planning to issue approximately 713 million new shares to its major shareholder, expecting to raise 3 billion yuan.

Ultimately, the cost of Huafa’s counter-cyclical expansion will still have to be borne by minority shareholders.

If the existing land reserve issue is a historical problem, where does Huafa’s future lie?

In the past two years, leading real estate companies like China Resources, China Overseas, and Longhu have adopted a consistent strategy: shrinking their real estate development business and heavily investing in commercial operations and other operational businesses. This includes Country Garden, which has completed its debt restructuring and is now focusing on commercial operations.

In fact, as early as 2014, Huafa established a commercial management company, but its responsibilities leaned more towards bundling the commercial aspects of residential development projects. Currently, it has invested in a total of 160 commercial projects nationwide, with a managed scale of 3.65 million square meters. From 2022 to 2024, Huafa’s commercial rental income was 344 million yuan, 680 million yuan, and 785 million yuan, respectively, showing an upward trend, but it has yet to form a scale.

Regarding Huafa, looking back reveals historical issues, while looking forward indicates a future still in its infancy. This also means that the turbulence at Huafa will continue.

Regarding the concentrated departures of executives, regional layouts, future business adjustments, and scale expectations, Source Media has sent inquiries to Huafa; as of the publication date, no response has been received.

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