Shenzhen Metro Group Co. reported a 37.5 billion yuan ($5.5 billion) loss last year, representing its largest annual deficit since at least 2006. The state-owned metro operator's financial deterioration stems primarily from its strategic investment in struggling developer China Vanke, where it holds a 27% stake.

The steep loss reflects ongoing impairment charges on Shenzhen Metro's long-term equity investment in Vanke, which has faced liquidity challenges for over two years. The developer has relied on bond extensions to avoid default, creating ripple effects for its major shareholders. This marks a sharp deterioration from the previous year, when Shenzhen Metro first posted an annual loss since 2010.

Vanke's prolonged financial stress directly impacts the metro operator's balance sheet, demonstrating how China's property sector troubles extend beyond individual developers to their state-owned stakeholders. The loss underscores the broader systemic risks facing government-backed investments in the embattled real estate market.

For investors, this development signals continued uncertainty around state-owned enterprise exposure to property sector volatility, with potential implications for future government bailouts and the health of China's municipal financing vehicles.