(Yicai) April 2 -- China Vanke has rebutted allegations made by a business partner that the real estate giant evaded paying taxes among other illegal acts, saying the claims were “gravely unfounded” and defamatory. 

Vanke will take legal action to protect its rights, the Shenzhen-based builder said yesterday after Yantai Bairun Real Estate published an open letter to the State Taxation Administration earlier the same day.

In the letter, Bairun alleged that Vanke's senior management, led by Chairman Yu Liang, used the company to evade tax, misuse funds, run a loan business at high interest rates, and engage in money laundering. Ten firms stamped the letter with their corporate seals.

The business dispute between Vanke's branch in Yantai, a port city in China’s eastern Shandong province, and its local partners is already in legal proceedings and the developer expects a fair ruling, it noted.

Vanke’s shares [SHE: 000002] closed 5.4 percent down at CNY8.50 (USD1.18) apiece in Shenzhen today, the stock’s lowest point since July 2014.

Bairun had also published an open letter on Jan. 18 through its WeChat account, saying it had reported Vanke’s tax evasion as early as last August. Yantai's tax authorities launched an investigation, but Vanke refused to submit its accounts for five months and did not even adjust them, Bairun noted at the time.

Vanke and Bairun have jointly developed many projects, with their tie-up based on a joint venture model, in which the former owns 51 percent of each project and the latter the rest.

Vanke's sales rights and interests in commercial housing in Yantai reached about CNY1.6 billion (USD221.2 million) last year, the highest in the city, according to data from research institute CRIC. However, its local sales accounted for just 5 percent of the total.

With the slump in China’s real estate market, many developers have defaulted, including giants China Evergrande Group and Country Garden. The market is paying attention to Vanke's financial situation, although it has not yet defaulted. 

Vanke has faced fundraising pressures but will somehow make it through, President and Chief Executive Zhu Jiusheng said on a recent earnings conference call.

On March 11, international rating agency Moody's announced that it had revoked Vanke's Baa3 issuer rating and assigned it a corporate family rating of Ba1.

Editor: Martin Kadiev