THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW This section contains certain information, statistics and data which are derived from official government publications and industry sources as well as a commissioned report from C&W, an Independent Third Party. The information from official government publications and the Industry Report may not be consistent with information available from other sources within or outside the PRC and Hong Kong. We believe that the sources of the information in this section are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any part has been omitted that would render such information false or misleading. The information has not been independently verified by the Relevant Persons and no representation is given as to its accuracy. Accordingly, such information should not be unduly relied upon. SOURCE OF INFORMATION We commissioned the Industry Report from C&W relating to the economy of the PRC, the residential and retail property markets of Nanjing, Changshu, Changzhou, Huai’an, Jiangyin, Lianyungang, Nantong, Taizhou, Yancheng, Yixing and Zhangjiagang in Jiangsu Province, Hangzhou, Huzhou, Jiaxing and Shaoxing in Zhejiang Province, Shanghai, Luoyang in Henan Province, and Liupanshui in Guizhou Province in which our Group operates. C&W has charged a total fee of HK$780,000 for the preparation of the Industry Report. C&W is a global real estate adviser, which offers a range of services including investment agency, leasing agency, property and facilities management, project and building consultancy, investment and asset management, market research and forecasting and valuation. C&W has 400 offices in 70 countries. For the [REDACTED], C&W also serves as our Company’s independent property valuer. C&W provided services through its independent valuation team and independent market research team. The Industry Report was prepared primarily by the designated market research team of C&W based on data from the PRC government, renowned research institutions and the proprietary databases of C&W. In the course of research, C&W conducted interviews with local marketing agents in the property sector. The following sets out the main reasons why C&W adopted the above sources of information and considered them as reliable: • it is general market practice to adopt official data and announcements from various Chinese government agencies; and • C&W understands the data collection methodology and source of the subscribed database from China Real Estate Index System. While preparing the Industry Report, we have relied on the major assumptions listed below: • the macro-economic environment of each of the PRC, Jiangsu, Zhejiang, Henan and Guizhou Provinces, and Shanghai is expected to grow at a steady rate; • the political environment of the PRC remains stable; and • the real estate industry of each of the PRC, Jiangsu, Zhejiang, Henan and Guizhou Provinces, and Shanghai is expected to grow at a steady rate. Our Directors confirm that to the best of their knowledge and information and taking reasonable care, there is no adverse change in the market information since the date of the Industry Report, which may qualify, contradict or have an impact on the information in this section. OVERVIEW OF THE PRC ECONOMY In recent years, the PRC’s economy has experienced a steady growth with a softening trend, due to the influence of various macro-economic policies. The table below sets out selected economic indicators of the PRC for the years indicated. —86— THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW 2013-2019 2013 2014 2015 2016 2017 2018 2019 CAGR Nominal GDP (RMB billion) .... 56,885 63,646 67,671 74,413 82,712 90,031 99,087 9.7% Real GDP growth (%) .......... 7.7% 7.4% 6.9% 6.7% 6.9% 6.6% 6.1% – Nominal GDP per capita (RMB) . 41,805 46,531 49,229 53,817 59,660 66,006 70,892 9.2% Urban disposable income per capita (RMB) ............... 26,467 28,843 31,195 33,616 36,396 39,251 42,359 8.2% Fixed asset investment (RMB billion) ............... 44,630 51,276 56,200 60,647 64,124 64,568 56,087 3.9% Sources: China Statistical Yearbook 2019, National Bureau of Statistics, C&W OVERVIEW OF THE PRC PROPERTY MARKET Under the growth of the PRC’s economy, domestic investment and consumption, the PRC property market has been growing rapidly in recent years. Both the residential property market and the retail property market have experienced notable growth. The table below sets out selected indicators of the property market of the PRC for the years indicated. 2013-2019 2013 2014 2015 2016 2017 2018 2019 CAGR Total real estate investment (RMB billion) ............... 8,601 9,504 9,598 10,258 10,980 12,026 13,219 7.4% Residential Real estate residential investment (RMB billion) ............... 5,895 6,435 6,460 6,870 7,515 8,519 9,709 8.7% Total GFA of commodity residential properties sold (million sq.m.) .............. 1,157 1,052 1,124 1,375 1,448 1,479 1,501 4.4% ASP of commodity residential properties (RMB per sq.m.) .... 5,850 5,933 6,473 7,203 7,614 8,544 9,287 8.0% Retail Real estate retail investment (RMB billion) ............... 1,194 1,435 1,461 1,584 1,564 1,418 1,323 1.7% Total GFA of retail properties sold (million sq.m.) .............. 85 91 93 108 128 120 102 3.1% ASP of retail properties (RMB per sq.m.)............. 9,777 9,817 9,566 9,786 10,323 11,151 10,952 1.9% Sources: China Statistical Yearbook 2019, National Bureau of Statistics, C&W KEY DRIVERS OF THE PRC PROPERTY MARKET The prominent growth drivers of the PRC property market are urbanization and the growth of urban population. Over the past 10 years, the urbanization rate in the PRC increased by approximately 1% to 1.5% annually, reaching 60.6% in 2019. An increase of 1.0% represents an increase of approximately 14 million rural people migrating into urban areas, which generates substantial housing demand and increases consumption levels in urban areas in the PRC. Moreover, according to notice of “New Type Urbanization Construction and Urban-Rural Integration Development in 2020”《 ( 2020年新型城鎮化建 設和城鄉融合發展重點任務》) issued by The National Development and Reform Commission on 3 April 2020, measures such as emphasizing small town development, improving integrated transportation network, enhancing public service level, etc., would be carried out to increase the level and quality of China’s urbanization in the future. The table below sets out selected indicators of urbanization of the PRC for the years indicated. —87— THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW 2013-2019 2013 2014 2015 2016 2017 2018 2019 CAGR Population (million)............ 1,361 1,368 1,375 1,383 1,390 1,395 1,400 0.5% Urban population (million) ...... 731 749 771 793 813 831 848 2.5% Urbanization rate (%) .......... 53.7% 54.8% 56.1% 57.3% 58.5% 59.6% 60.6% – Sources: China Statistical Yearbook 2019, National Bureau of Statistics, C&W The nineteen city clusters included in the Thirteenth Five-Year Plan, which accounted for more than 90% of the national GDP, have witnessed the most significant population growth and urbanization across the PRC. Strengthened coordination among these clustered territories helps enhance social and economic development, and as a result, fuels the growth of the economy and the regional property markets. Historical Price Trend of Construction Material And Land Costs The prices of construction materials and land are important cost factors in property development projects. The prices of major construction materials in the PRC such as cement and steel were subject to market fluctuation and volatility, whereas the average land prices had been growing rapidly from 2013 to 2018 at a CAGR of approximately 16.7%. The table below sets out the price indexes of construction raw materials and average land price of the PRC for the years indicated. 2013-2018 2013 2014 2015 2016 2017 2018 2019 CAGR Construction materials price index.................. 101.0 101.8 98.9 99.1 105.1 110.3 N/A(1) 1.8% Cement price index ............ 98.6 100.7 96.7 96.7 106.8 110.9 N/A(1) 2.4% Steel price index .............. 94.1 94.9 88.1 96.3 120.7 110.0 N/A(1) 3.2% Average land premium (RMB per sq.m.)............. 2,555.3 3,001.5 3,341.2 4,144.9 5,348.6 5,525.4 N/A(1) 16.7% Note: (1) Such data was not available from the sources as of the Latest Practicable Date. Sources: National Bureau of Statistics, C&W OVERVIEW OF THE ECONOMY AND THE RESIDENTIAL PROPERTY MARKETS OF SELECTED LOCATIONS IN JIANGSU PROVINCE Jiangsu Province is located in the east coast of the PRC with a total area of approximately 102,600 sq.km. and a population of approximately 80.7 million as of 2019. The economy of Jiangsu Province has been developing steadily in recently years. Its nominal GDP increased annually between 2013 and 2019 at a CAGR of 8.9%, reaching RMB9,963.5 billion in 2019, reflecting broad-based growth momentum.