INDUSTRY OVERVIEW
The information and statistics set forth in this section and elsewhere in this prospectus have been derived from various official and government publications, publicly available market research sources and an industry report commissioned by us and independently prepared by China Index Academy in connection with the Global offering. We believe that the sources of such information and statistics are appropriate and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information and statistics are false or misleading in any material respect. None of our Company, the Joint Sponsors, the Joint Global Coordinators, the Joint Bookrunners, the Underwriters, any other party involved in the Global Offering or their respective directors, advisers and affiliates have independently verified such information and statistics. Accordingly, none of our Company, the Joint Sponsors, the Joint Global Coordinators, the Joint Bookrunners, the Underwriters, any other party involved in the Global Offering or their respective directors, advisers and affiliates makes any representation as to the correctness or accuracy of such information and the statistics contained in this prospectus, which may be inaccurate, incomplete, out-of-date or inconsistent with other information complied within or outside the PRC. Such information should not be unduly relied upon.
CHINA INDEX ACADEMY
We have commissioned China Index Academy, an independent third party and an experienced property research institution in the PRC, to prepare an industry report as to the real estate markets in China and the cities in which we currently operate, as well as regional ranking information in the Yangtze River Delta region. We paid a total consideration of RMB300,000 for this report.
China Index Academy has prepared the industry report based on its self-developed database, CREIS China Index Database (CREIS中指數據), the database of fdc.soufun.com and various government publications. These databases and government publications have been widely used and relied upon in the PRC property market.
China Index Academy is a Chinese property research institution, which was integrated in 2004 with a number of China research resources, including China Real Estate Index System, Soufun Research Institute, China Villa Index System and Top 10 China Real Estate Research Group.
OVERVIEW OF THE PRC ECONOMY
Overall Economic Growth
China has experienced significant economic growth over the last decade and has, in February 2011, replaced Japan as the second largest economy in the world. China’s nominal GDP had increased from RMB21,631 billion in 2006 to RMB51,932 billion in 2012, representing a CAGR of 15.7%. Fixed asset investment in China also has increased significantly over the same period, from RMB11,000 billion in 2006 to RMB37,468 billion in 2012, representing a CAGR of 22.7%, indicating continued strong investment confidence and signaling further growth potential.
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The table below sets forth selected domestic economic statistics for the periods indicated:
2006 2007 2008 2009 2010 2011 2012 CAGR Nominal GDP (RMB billion) ...... 21,631 26,581 31,405 34,090 40,151 47,310 51,932 15.7% Real GDP growth rate (%) ...... 12.7 14.2 9.6 9.2 10.4 9.3 7.8 NA Fixed asset investment (RMB billion) ...... 11,000 13,732 17,283 22,460 27,812 31,149 37,468 22.7% Fixed asset investment growth rate (%)...... 23.9 24.8 25.9 30.0 23.8 12.0 20.3 NA
Source: National Bureau of Statistics
Urbanization
Urbanization in the PRC has been accelerating and expanding in the past decade as evidenced by rapidly increasing urban population and urbanization rate, serving as a strong driver for domestic economic growth, particularly, for the real estate industry. The urban population reached 712 million in 2012 from 577 million in 2006, representing a CAGR of 3.6%, while the total population grew at a CAGR of 0.5% to 1,354 million from 1,314 million over the same period. In particular, in 2011, total urban population exceeded total rural population for the first time. The table below sets forth urbanization statistics for the periods indicated:
2006 2007 2008 2009 2010 2011 2012 CAGR Urban population (million)...... 577 594 607 622 666 691 712 3.6% Total population (million)...... 1,314 1,321 1,328 1,335 1,341 1,347 1,354 0.5% Urbanization rate (%)...... 43.9 44.9 45.7 46.6 49.7 51.3 52.6 NA
Source: National Bureau of Statistics
Disposable Income
The robust growth of the PRC economy has contributed to the continuous increase in the per capita disposable income of urban households, which increased from RMB11,759 in 2006 to RMB24,565 in 2012, representing a CAGR of 13.1%. The table below sets forth per capita disposable income of urban households for the periods indicated:
2006 2007 2008 2009 2010 2011 2012 CAGR Per capita disposable income of urban households (RMB) ...... 11,759 13,786 15,781 17,175 19,109 21,810 24,565 13.1%
Source: National Bureau of Statistics
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THE PRC RESIDENTIAL REAL ESTATE MARKET
Overview
The PRC residential real estate market has grown rapidly in the last few years, driven by the increase in purchasing power and disposable income of urban residents as a result of urbanization and the overall economic growth. Despite the macro-control policy changes in recent years with the aim of regulating overheated speculative real property investment, total investment in PRC residential property market increased from RMB1,364 billion in 2006 to RMB4,937 billion in 2012, representing a CAGR of 23.9%. In particular, such growth rates in 2007, 2010 and 2011 all exceeded 30.0%. With respect to the transaction volume and ASP for residential properties, both increased steadily for the period from 2006 to 2012, despite the slight dip in growth in 2008 due to the impact of global financial crisis. The below table sets forth the relevant data relating to the residential property market in China for the periods indicated:
2006 2007 2008 2009 2010 2011 2012 CAGR Investment in residential property market (RMB billion) ...... 1,364 1,801 2,244 2,561 3,403 4,432 4,937 23.9% Total residential GFA under development (sq.m. million) ...... 1,517 1,868 2,229 2,513 3,148 3,877 4,290 18.9% Total residential GFA completed (sq.m. million) ...... 455 498 543 596 634 743 790 9.7% Total residential GFA sold (sq.m. million) ..... 554 701 593 862 934 965 985 10.1% Total residential property transaction volume (RMB billion) ...... 1,729 2,557 2,120 3,843 4,412 4,820 5,347 20.7% ASP of residential properties (RMB/per sq.m.)...... 3,119 3,645 3,576 4,459 4,725 4,993 5,430 9.7%
Source: China Index Academy
Regulatory and Recent Development
Real estate industry is highly regulated in the PRC and the central and local governments have promulgated a variety of policies and regulations from time to time to monitor and control this sector during the last decade. Since 2004 to 2008, a series of regulations were released in order to curb the overheated real estate market and control the speculative investments, such as increasing the down payment percentage, mortgage loan interest rates and property transfer tax. Such restrictions were slightly reverted in late 2008 due to the policy change to encourage the growth in the real estate market in response to the global financial crisis. Since 2010, the PRC government has again taken various actions and enacted policies and administrative measures to further discourage property speculation and increase the supply of affordable housing. In early 2013, the State Council further reaffirmed the policies to control real estate
67 INDUSTRY OVERVIEW market by implementing restrictive measures on home buying and mortgage, including allowing local banks to increase the percentage of down payment and mortgage rates for second-home purchasers. As a result, several cities, including Beijing and Shanghai, announced detailed local regulations following the central government’s policies to further tighten the control over the real estate market. For example, in April 2013, Beijing increased the percentage of down payment to 70% for second-home purchasers. Shanghai will strictly follow the 20% taxation policy and will adjust the down payment and mortgage rates for second-home purchases as and when appropriate, depending on market condition. Furthermore, no loans will be approved for the purchase of a third house. In addition, in July 2013, according to a notice published by the PBOC, the controls over financial institutions’ lending rates are cancelled starting from July 20, 2013, the personal housing loan floating interest rate range remained unchanged. The differentiated housing mortgage and interest rate policies indicate the government’s intention to continue to control the growth of real estate market.
On the other hand however, the Central Economic Work Conference held in December 2012 emphasized, among other things, to improve the level and quality of urbanization, which, is expected to facilitate the development of the real estate market. In the first quarter of 2013, real estate market in the PRC continued to increase, as evidenced by the 37.1% year-over-year increase in the total commodity property GFA sold as well as the total commodity property transaction volume. In addition, the ASP of commodity property for the first three months in 2013 was RMB6,695 per sq.m., a 17.6% increase from RMB5,691 per sq.m. in the same period in 2012.
For details as to recent real estate regulations and policies, please refer to the section “Summary of Principal PRC Legal and Regulatory Provisions” in Appendix IV.
OUR MARKET POSITION AND COMPETITIVE LANDSCAPE
The property market in China is highly fragmented and competitive. In particular, the residential property market in the Yangtze River Delta region in which we operate have been highly competitive in recent years. Property developers from the PRC and overseas have entered the property development markets in Shanghai and other major cities in the Yangtze River Delta region. We compete with them in relation to a number of factors, including ability to acquire land, brand recognition, financial resources, prices, product quality, service quality, ability to react to change in market condition and other factors. Despite our leading market position in the Yangtze River Delta region, some of these competitors may have better track records, greater financial, human and other resources, larger sales networks and stronger brand recognition, and we may face challenges in maintaining our market position as a result. Furthermore, different regions in the PRC have different regulatory restrictions on property development, and consumer preferences also typically vary between different regions as well, even within the different cities in the Yangtze River Delta region. In addition, the rapid development of major cities in the Yangtze River Delta region in recent years has led to a diminishing supply of undeveloped land in desirable locations within the region. The PRC government has also implemented policies controlling the amount of new land available for development at the same time. These factors have increased competition for available land and land grant premiums. Competition in the Yangtze River Delta region will continue to be driven primarily by demand from first-time home purchasers and those purchasing to upgrade their existing living conditions. Consumers are also starting to increase their focus on quality of the properties, a competitive factor that is becoming more significant as a result.
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We believe that the real estate market in the Yangtze River Delta region still has large growth potential, and our rapid-asset turnover model, along with our leading market position and broad geographical coverage in the region, provide us with the capability to capture such opportunities. According to China Index Academy, we are one of the early movers in real estate development industry in the Yangtze River Delta region. We have expanded our operational footprint to 13 cities, 11 of which are among the 16 core cities in the Yangtze River Delta region. According to China Index Academy, we ranked No. 3 in terms of the broadest operational coverage of core cities in the Yangtze River Delta region, only after Greenland Holding Group Company Limited and Greentown China Holding Limited. Leveraging our rapid-asset-turnover model, we were recognized by Enterprise Research Institute of Development Research Centre of the State Council (國務院發展研究中心企業研究所), Institute of Real Estate Studies of Tsinghua University (清華大學房地產研究所) and China Index Academy (中國指數研究院) as one of the top 10 developers in terms of operating efficiency in 2012 and 2013. The table below sets forth ranking of the top 10 developers in terms of operating efficiency in China:
Rank 2012 2013 1 Evergrande Real Estate Group Limited Evergrande Real Estate Group Limited 2 China Vanke Co., Ltd. China Vanke Co., Ltd. 3 Jinke Property Group Co., Ltd. Jinke Property Group Co., Ltd. 4 Future Land Development Holdings Limited Future Land Development Holdings Limited 5 Kaisa Group Holdings Ltd. Kaisa Group Holdings Ltd. 6 Xinyuan Real Estate Co., Ltd. CIFI Holdings (Group) Co., Ltd. 7 CIFI Holdings (Group) Co., Ltd. Lianfa Group Co., Ltd. 8 Jingrui Properties (Group) Landsea Group Co., Ltd. 9 Lianfa Group Co., Ltd. China Aoyuan Property Group Limited. 10 China Fortune Land Development Co., Ltd. Jingrui Properties (Group)
Source: China Index Academy
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According to China Index Academy, we were also a top 10 developer in the Yangtze River Delta region in 2012 and 2013 among all developers with primarily focus in this region, which are developers that derive at least 50% of their revenues from the region. The table below sets forth ranking of the top 10 developers with primary focus in the Yangtze River Delta region. China Index Academy’s ranking of the top 10 developers with primary focus in the Yangtze River Delta region is determined by applying factor analysis methodology taking into account seven major indicators and more than 30 supplemental indicators, including a company’s scale (such as total assets and total GFA sold), profitability (such as net profit and return on total assets), growth (such as growth rate of GFA sold and growth rate of revenue from the sale of properties), operating stability (such as advanced proceeds received from customers and current ratio), financing capability (such as cash flow from financing activities and ability to increase banking facilities), operating efficiency (such as asset turnover ratio) and social responsibilities (such as taxes paid).
Rank 2012 2013 1 Greenland Holding Group Company Limited Greenland Holding Group Company Limited 2 Greentown China Holdings Limited Greentown China Holdings Limited 3 Future Land Development Holdings Limited Shimao Property Holdings Limited 4 Shanghai Forte Land Co., Limited Future Land Development Holdings Limited 5 Hangzhou Binjiang Real Estate Group Co., Ltd. Hangzhou Binjiang Real Estate Group Co., Ltd. 6 Yinyi Real Estate Co., Ltd. Yinyi Real Estate Co., Ltd. 7 Powerlong Real Estate Holdings Limited Powerlong Real Estate Holdings Limited 8 CIFI Holdings (Group) Co., Ltd. CIFI Holdings (Group) Co., Ltd. 9 Shanghai Sansheng Hongye Investment (Group) Jingrui Properties (Group) Co., Ltd. 10 Jingrui Properties (Group) Shanghai Sansheng Hongye Investment (Group) Co., Ltd.
Source: China Index Academy
Furthermore, we were named as No. 53, No. 55 and No. 47 of the top 500 real estate companies in China in 2011, 2012 and 2013, respectively, by the China Real Estate and Housing Research Association (中國房地產研究會), the China Real Estate Industry Association (中國房地產業協會) and the China Real Estate Appraisal Center (中國房地產測評中心).
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MARKET FOCUS – YANGTZE RIVER DELTA REGION
Overview
The Yangtze River Delta region, covering Shanghai, Jiangsu Province and Zhejiang Province, has an aggregate site area of approximately 2.0 billion sq.m. and is one of the most affluent regions in the PRC. It is widely regarded as the largest regional economy in the PRC. According to China Index Academy, the total industrial gross output value of the Yangtze River Delta region accounted for approximately 25% of national gross output value.
The State Council issued “The Regional Plan for the Yangtze River Delta Region” in 2010, which identified 16 core cities based on a variety of factors, including economic conditions, location and population. The 16 cities are Shanghai (上海); in Jiangsu Province, Nanjing (南京), Suzhou (蘇州), Wuxi (無錫), Changzhou (常州), Zhenjiang (鎮江), Nantong (南通), Yangzhou (揚州) and Taizhou (泰州); and in Zhejiang Province, Hangzhou (杭州), Ningbo (寧波), Shaoxing (紹興), Huzhou (湖州), Jiaxing (嘉興), Zhoushan (舟山) and Taizhou (台州). According to this Regional Plan, the 16 core cities, led by Shanghai, are expected to further develop as a world-class city cluster. The below illustrates the location of the 16 core cities.
Nanjing Yangzhou Jiangsu Changzhou Taizhou
Zhenjiang Suzhou
Nantong Wuxi Anhui Shanghai Huzhou Jiaxing Hangzhou Zhejiang Jiangxi Zhoushan
Ningbo
Shaoxing Fujian Taizhou
Heilongjiangongjiang
Jilinilin Inner Mongolia
Liaoning Beijing Xinjiang Tianjin Hebei
Ningxia Shanxi Shandong
Qinghai Jiangsu Gansu Shaanxi Henan
Tibet Shanghai Hubei Anhui Chongqing Zhejiang Sichuan
Hunan Jiangxi Guizhou Fujian
Guangxi Guangdong Yunnan
Hainan
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The overall economic statistics of the 16 core cities generally outperform the national statistics. For example, according to China Index Academy, the total nominal GDP contributed by these 16 cities accounted for approximately 17.3% of total national nominal GDP in 2012. 12 of the 16 core cities were ranked in the top 50 in terms of GDP, with Shanghai taking first place. The following table sets forth the ranking of the 12 core cities in the top 50 in China in terms of nominal GDP:
Cities Rank Shanghai...... 1 Suzhou...... 6 Hangzhou ...... 9 Wuxi...... 10 Nanjing...... 14 Ningbo...... 16 Nantong...... 26 Changzhou...... 33 Shaoxing...... 38 Jiaxing...... 45 Yangzhou...... 47 Taizhou, Zhejiang Province ...... 49
Source: China Index Academy
The aggregate population of the 16 core cities amounted to 106 million in 2012, accounting for approximately 7.9% of total population in the PRC and these cities currently achieved an average urbanization rate over 60%. In 2012, the 16 core cities were all ranked within top 50 in terms of per capita disposable income for urban households, with 11 of them ranked in the top 20. The following table sets forth the ranking of the 11 core cities in the top 20 in China in terms of per capita disposable income for urban households:
Cities Rank Shanghai...... 3 Ningbo...... 5 Suzhou...... 7 Shaoxing...... 8 Nanjing...... 10 Hangzhou ...... 11 Jiaxing...... 12 Wuxi...... 14 Zhoushan ...... 16 Taizhou, Zhejiang Province ...... 17 Changzhou...... 18
Source: China Index Academy
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The per capita disposable income for urban households of these 16 cities reached RMB34,033 in 2012, being almost 1.4 times of the national per capita disposable income for urban households. In addition, according to China Index Academy, the total deposit balance of domestic currency and foreign currency with monetary institutions in the 16 core cities at the end of 2012 amounted to RMB17.8 trillion, accounting for approximately 18.9% of total national deposit balance at the end of 2012, while the total outstanding loan balance at that time was RMB13.7 trillion, approximately 20.4% of total national loan balance.
The table below sets forth certain economic statistics of the 16 core cities in the Yangtze River Delta region for the periods indicated:
2006 2007 2008 2009 2010 2011 2012 CAGR Nominal GDP (RMB billion)...... 4,009 4,759 5,514 5,987 6,970 8,214 8,995 14.4% Per capita disposable income for urban households (RMB) ...... 17,237 19,719 22,110 24,068 26,559 30,359 34,033 12.0%
Source: China Index Academy
Property Market in the Yangtze River Delta Region
The population, urbanization level, disposable income, deposit and loan balances in the Yangtze River Delta region have all indicated strong demand and high purchasing power of local residents, which presents a huge potential for real estate market in the region.
Driven by increasing housing demand and purchasing power, according to China Index Academy, the ASP of residential properties in the Yangtze River Delta region had climbed from RMB4,914 per sq.m. in 2006 to RMB8,751 per sq.m. in 2010, RMB9,053 per sq.m. in 2011 and further to RMB9,367 per sq.m. in 2012, respectively, representing a CAGR of 11.3% from 2006 to 2012. In 2012, the ASP of residential properties in the PRC was RMB5,430 per sq.m., only 58.0% of that of the 16 core cities in the Yangtze Rive Delta region.
The sales of properties fluctuated during 2006 to 2012. The total residential GFA sold in the Yangtze River Delta region decreased in 2008 and 2010, respectively, which was primarily due to the global economic crisis and regulatory changes which were promulgated to curb the overheated property market. Despite of these adverse market conditions in 2008, 2010 and 2011, total residential GFA sold in the Yangtze River Delta region in 2006 was 92.1 million sq.m., compared to an aggregate 554.2 million sq.m. in the PRC, which increased to 97.1 million sq.m. in 2012, compared to an aggregate of 984.7 million sq.m. in the PRC. Corresponding total transaction volume of properties in the Yangtze River Delta region increased from RMB452.4 billion in 2006 to RMB909.7 billion in 2012, respectively, representing a CAGR of 12.4% from 2006 to 2012. Over the same period, total property transaction volume in the PRC increased from RMB1,728.8 billion in 2006 to RMB5,346.7 billion in 2012.
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Property construction activities have also been affected by the regulatory and policy changes in the property industry, which slowed in 2008 and 2010, but had recovered since 2010. Total residential GFA under development in the Yangtze River Delta region in 2006 was 297.1 million sq.m., compared to an aggregate 1,517.4 million sq.m. in the PRC, which increased to 493.4 million sq.m. in 2012, compared to an aggregate of 4,289.6 million sq.m. in the PRC. Total residential GFA completed in the Yangtze River Delta increased from 89.4 million sq.m. in 2006 to 96.2 million sq.m. in 2012, reaching a record high. Over the same period, total residential GFA completed in the PRC increased 454.7 million sq.m. in 2006 to 790.4 million sq.m. in 2012, respectively.
The table below sets forth certain property market statistics of the 16 core cities in the Yangtze River Delta region as well as in the PRC for the periods indicated:
2006 2007 2008 2009 2010 2011 2012 CARG 16 Core Cities in the Yangtze River Delta Region Total residential GFA under development (sq.m. million) ...... 297 321 344 342 394 454 493 8.8% Total residential GFA completed (sq.m. million) ...... 89 91 94 86 81 70 96 1.2% Total residential GFA sold (sq.m. million) .... 92 116 75 135 103 77 97 0.9% Total residential property transaction volume (RMB billion) ...... 452 678 446 1,035 899 697 910 12.4% ASP of residential properties (RMB/sq.m.) ...... 4,914 5,817 5,909 7,687 8,751 9,053 9,367 11.3%
Source: China Index Academy
Future Growth Potential
According to the forecast and estimates by China Index Academy, given that the growth rates of overall economy in the PRC and in the Yangtze River Delta region are expected to decrease and that the current restrictive regulations and policies controlling real estate market are expected to continue playing a significant role in the industry, the property market in the Yangtze River Delta region is estimated to further grow at a moderate growth rate.
For example, China Index Academy projected that the property ASP as well as the total property transaction volume in the Yangtze River Delta region will increase by approximately 10% annually. ASP in the region is expected to exceed RMB10,000 per sq.m. in 2015.
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City Economic and Property Market Statistics
We have expanded our operations into 13 cities across China, 11 of which are among the 16 core cities in the Yangtze River Delta Region. We intend to actively seek opportunities to deepen our market penetration in existing cities and to tap into new core cities as we believe the Yangtze River Delta region remains the most economically prosperous area in the PRC and has the greatest potential for property development.
The table below sets forth certain general economic statistics of the cities where we have established operations for the periods indicated:
Nominal GDP 2006 2007 2008 2009 2010 2011 2012 CAGR RMB million Shanghai ...... 1,029,697 1,200,106 1,369,815 1,490,093 1,687,242 1,919,569 2,010,100 11.8% Jiangsu Province: Suzhou ...... 490,063 585,011 707,809 774,020 900,000 1,071,699 1,200,000 16.1% Changzhou ...... 158,511 191,350 226,632 251,993 297,670 358,099 396,980 16.5% Nantong ...... 178,839 216,369 259,313 287,280 341,788 408,022 455,870 16.9% Yangzhou ...... 112,523 135,721 164,589 185,639 220,799 263,030 293,320 17.3% Taizhou ...... 103,708 122,232 144,629 166,092 200,258 242,261 270,261 17.3% Zhejiang Province: Hangzhou ...... 344,151 410,017 478,116 509,866 594,582 701,906 780,398 14.6% Ningbo ...... 287,444 343,500 396,400 421,460 512,580 605,924 652,470 14.6% Shaoxing ...... 103,708 122,232 144,629 166,092 200,258 242,261 270,167 17.3% Huzhou ...... 76,102 89,202 103,489 111,150 130,156 152,006 166,200 13.9% Zhoushan ...... 33,520 40,837 49,025 53,326 63,345 77,275 85,195 16.8%
Source: China Index Academy
Per Capita Disposable Income of Urban Households
2006 2007 2008 2009 2010 2011 2012 CAGR
RMB Shanghai ...... 20,668 23,623 26,675 28,838 31,838 36,230 40,188 11.7% Jiangsu Province: Suzhou ...... 18,532 21,260 24,680 27,188 29,219 34,617 38,000 12.7% Changzhou ...... 16,650 19,089 21,234 23,392 26,269 29,559 33,587 12.4% Nantong ...... 14,058 16,451 17,540 19,469 21,825 25,094 28,292 12.4% Yangzhou ...... 12,945 15,057 15,465 17,332 21,766 22,835 28,001 13.7% Taizhou ...... 12,682 14,940 16,165 18,079 21,359 23,597 26,574 13.1% Zhejiang Province: Hangzhou ...... 19,027 21,689 23,534 26,171 30,035 32,434 37,511 12.0% Ningbo ...... 19,642 22,332 25,196 27,237 30,166 34,321 37,902 11.6% Shaoxing ...... 19,486 21,971 24,646 26,874 30,164 33,273 36,911 11.2% Huzhou ...... 17,503 19,663 21,604 23,280 25,729 29,367 32,987 11.1% Zhoushan ...... 17,525 19,856 22,257 24,082 26,242 30,496 34,224 11.8%
Source: China Index Academy
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Urbanization Rate
2006 2007 2008 2009 2010 2011 2012 CAGR
% Shanghai ...... 85.8 86.8 87.5 88.0 88.6 89.1 89.7 – Jiangsu Province: Suzhou ...... 65.1 65.6 66.0 66.3 70.0 71.2 72.3 – Changzhou ...... 60.5 60.9 61.0 60.9 63.2 65.2 75.4 – Nantong ...... 46.9 48.6 50.3 52.7 55.8 57.6 58.7 – Yangzhou ...... 49.2 50.0 51.3 52.9 56.7 57.9 57.9 – Taizhou ...... 46.0 48.0 49.0 55.0 56.0 57.0 58.0 – Zhejiang Province: Hangzhou ...... 68.9 69.0 69.3 69.5 73.3 73.9 74.3 – Ningbo ...... 63.1 63.2 63.6 63.7 68.3 69.0 70.0 – Shaoxing ...... 56.0 56.9 57.5 57.7 58.6 59.3 60.1 – Huzhou ...... 48.0 49.3 50.0 50.7 52.9 53.3 54.0 – Zhoushan ...... 61.1 61.5 61.9 62.4 63.6 64.3 65.3 –
Source: China Index Academy
Fixed Asset Investment
2006 2007 2008 2009 2010 2011 2012 CAGR
RMB million Shanghai ...... 392,509 445,861 482,945 527,333 531,767 506,700 525,400 5.0% Jiangsu Province: Suzhou ...... 210,699 236,636 261,116 296,735 361,782 427,998 526,500 16.5% Changzhou ...... 95,156 120,394 144,817 170,477 210,360 222,326 276,010 19.4% Nantong ...... 104,890 126,580 150,541 180,238 216,838 237,836 288,650 18.4% Yangzhou ...... 53,330 71,788 94,998 106,392 133,185 147,543 178,365 22.3% Taizhou ...... 53,256 70,397 90,052 116,620 153,803 119,765 145,459 18.2% Zhejiang Province: Hangzhou ...... 146,074 168,413 198,050 229,165 275,313 310,002 372,275 16.9% Ningbo ...... 150,277 159,754 172,824 200,422 220,650 238,551 290,140 11.6% Shaoxing ...... 76,575 84,337 91,575 105,503 125,360 142,626 172,256 14.5% Huzhou ...... 47,975 45,834 52,524 63,869 71,783 80,467 97,073 12.5% Zhoushan ...... 21,899 27,964 33,943 40,066 41,384 47,609 60,081 18.3%
Source: China Index Academy
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We believe that the property market in the cities in which we have established operations have been and are expected to be grow in the near future. The table below sets forth certain residential property market statistics of the cities where we have established operations for the periods indicated:
Total Residential GFA Under Development
2006 2007 2008 2009 2010 2011 2012 CAGR
sq.m. million Shanghai ...... 79.9 76.4 68.7 65.5 73.1 83.9 83.2 0.7% Jiangsu Province: Suzhou ...... 40.4 46.4 52.0 51.1 58.1 60.3 60.5 6.9% Changzhou ...... 13.5 17.0 18.5 20.0 21.9 27.1 30.5 14.5% Nantong ...... 9.4 11.5 15.1 15.5 19.2 19.2 30.8 21.8% Yangzhou ...... 19.5 19.5 20.1 19.1 22.4 28.9 33.6 9.5% Taizhou ...... 4.0 5.9 10.0 8.8 10.9 12.8 13.9 22.8% Zhejiang Province: Hangzhou ...... 34.8 36.1 36.2 36.7 42.5 48.8 50.3 6.3% Ningbo ...... 19.5 19.5 20.1 19.1 22.4 28.9 33.6 9.5% Shaoxing ...... 10.2 12.2 12.3 13.0 14.7 20.0 22.4 14.0% Huzhou ...... 6.9 7.3 7.5 8.3 9.7 11.5 13.0 11.0% Zhoushan ...... 2.7 2.9 2.9 3.1 4.0 5.2 6.0 13.9%
Source: China Index Academy
Total Residential GFA Completed
2006 2007 2008 2009 2010 2011 2012 CAGR
sq.m. million Shanghai ...... 26.7 27.5 17.6 15.1 14.0 15.5 16.1 -8.3% Jiangsu Province: Suzhou ...... 14.8 14.8 13.8 14.1 11.2 9.2 13.9 -1.1% Changzhou ...... 3.0 4.9 5.4 5.5 4.9 4.6 6.4 13.7% Nantong ...... 3.1 3.4 5.0 4.4 5.2 5.3 6.1 11.9% Yangzhou ...... 2.4 2.6 4.2 4.3 3.7 3.7 4.4 11.0% Taizhou ...... 1.6 1.6 3.2 2.2 3.3 2.6 3.5 14.0% Zhejiang Province: Hangzhou ...... 6.3 7.7 7.7 6.3 8.0 8.4 6.7 1.2% Ningbo ...... 5.6 4.8 5.9 4.2 3.8 4.9 5.3 -0.8% Shaoxing ...... 2.7 2.5 2.7 3.3 2.2 2.7 3.4 4.0% Huzhou ...... 2.5 1.3 1.4 1.7 1.9 1.6 1.3 -9.8% Zhoushan ...... 0.9 1.0 0.8 0.5 1.0 0.5 1.5 9.4%
Source: China Index Academy
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Total Residential GFA Sold
2006 2007 2008 2009 2010 2011 2012 CAGR
sq.m. million Shanghai ...... 21.4 26.9 15.5 26.4 15.8 13.1 14.4 -6.4% Jiangsu Province: Suzhou ...... 11.9 16.6 8.9 20.1 11.5 9.4 12.6 0.9% Changzhou ...... 4.1 5.2 4.3 8.0 7.8 6.0 6.7 8.5% Nantong ...... 4.1 4.5 4.1 6.0 6.7 4.8 6.3 7.5% Yangzhou ...... 3.2 3.9 2.9 4.7 5.8 5.1 5.4 8.8% Taizhou ...... 2.3 2.6 3.0 3.6 4.6 3.9 2.8 3.6% Zhejiang Province: Hangzhou ...... 6.8 10.4 6.8 13.1 8.0 6.0 9.2 5.2% Ningbo ...... 5.1 6.6 3.6 6.5 5.0 3.4 4.6 -1.8% Shaoxing ...... 3.2 4.1 1.8 4.1 5.0 4.0 4.0 3.5% Huzhou ...... 2.0 2.4 1.6 3.6 3.2 2.8 2.3 2.7% Zhoushan ...... 0.8 1.3 0.7 1.5 1.1 1.2 0.5 -6.6%
Source: China Index Academy
Total Residential Property Transaction Volume
2006 2007 2008 2009 2010 2011 2012 CAGR
RMB million Shanghai ...... 174,702 219,835 143,674 310,549 210,596 186,114 226,898 4.5% Jiangsu Province: Suzhou ...... 52,695 82,787 49,258 127,375 93,251 85,274 113,428 13.6% Changzhou ...... 14,868 19,369 17,665 35,692 44,451 37,702 43,331 19.5% Nantong ...... 11,968 15,599 13,092 24,984 31,169 26,850 34,479 19.3% Yangzhou ...... 8,741 12,368 9,907 19,858 27,250 30,494 32,362 24.4% Taizhou ...... 5,516 7,653 9,625 12,971 20,808 21,842 15,740 19.1% Zhejiang Province: Hangzhou ...... 40,576 77,563 55,591 139,496 113,729 76,518 122,597 20.2% Ningbo ...... 26,170 40,116 24,435 59,118 58,090 38,670 52,229 12.2% Shaoxing ...... 12,376 19,631 9,216 25,697 37,118 34,166 35,113 19.0% Huzhou ...... 6,033 9,175 6,489 18,388 19,585 17,000 15,457 17.0% Zhoushan ...... 3,265 6,002 4,115 9,624 10,982 12,690 5,425 8.8%
Source: China Index Academy
78 INDUSTRY OVERVIEW
ASP
2006 2007 2008 2009 2010 2011 2012 CAGR
RMB/sq.m. Shanghai ...... 8,159 8,178 9,243 11,744 13,316 14,219 15,714 11.5% Jiangsu Province: Suzhou ...... 4,415 5,029 5,532 6,358 8,145 9,060 8,980 12.6% Changzhou ...... 3,645 3,765 4,117 4,448 5,735 6,269 6,516 10.2% Nantong ...... 2,926 3,325 3,226 4,192 4,689 5,569 5,458 10.9% Yangzhou ...... 2,696 3,201 3,446 4,254 4,681 6,007 6,025 14.3% Taizhou ...... 2,449 2,929 3,209 3,633 4,491 5,635 5,652 15.0% Zhejiang Province: Hangzhou ...... 5,967 7,432 8,212 10,613 14,259 12,749 13,293 14.3% Ningbo ...... 5,105 6,097 6,843 9,068 11,669 11,286 11,385 14.3% Shaoxing ...... 7,294 8,102 7,937 8,481 8,046 8,223 8,382 2.3% Huzhou ...... 3,076 3,760 4,107 5,087 6,156 6,156 6,738 14.0% Zhoushan ...... 4,083 4,809 6,091 6,493 9,488 10,689 10,203 16.5%
Source: China Index Academy
The table below sets forth the forecasted demand and supply of residential properties in the Yangtze River Delta region based on the estimated total residential GFA sold in the periods indicated:
Estimated Total Residential GFA Sold
2013 2014 2015
sq.m. million Shanghai...... 13.6 14.6 13.5 Jiangui Province: Suzhou...... 13.1 11.3 9.0 Changzhou...... 7.8 6.3 6.8 Nantong...... 6.7 6.0 5.6 Yangzhou...... 6.1 6.5 6.9 Taizhou...... 3.5 3.6 3.7 Zhejiang Province: Hangzhou...... 9.7 9.8 10.0 Ningbo...... 4.1 3.8 3.8 Shaoxing...... 4.5 4.6 4.8 Huzhou...... 2.8 2.9 3.0 Zhoushan...... 0.9 0.9 0.9
Source: China Index Academy
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MARKET FOCUS – TIANJIN AND CHONGQING
Overview
In addition to the Yangtze River Delta region, we have also expanded our footprint into Tianjin and Chongqing. Both of these cities belong to the five national central cities along with Shanghai, Beijing and Guangzhou, which represent the leading cities in the PRC. In addition, both Tianjin and Chongqing are centrally direct-controlled municipalities in the PRC under the direct administration of the central government.
Tianjin
Tianjin borders Hebei Province and Beijing, bounded to the east by the Bohai Gulf portion of the Yellow Sea. Tianjin is part of the Bohai Economic Rim and is the largest coastal city in northern China, and is the fourth largest in terms of population in China, and serves as a major seaport and gateway to Beijing. From 2006 to 2012, Tianjin’s nominal GDP grew at a CAGR of 19.8%, its fixed asset investment grew at a CAGR of 29.9% and per capita disposable income of urban households grew at a CAGR of 12.9%. The table below sets forth certain general economic statistics for Tianjin for the periods indicated:
Nominal GDP
2006 2007 2008 2009 2010 2011 2012 CAGR
RMB million Tianjin ...... 435,915 505,040 635,438 752,185 910,883 1,130,728 1,288,518 19.8%
Source: China Index Academy
Per Capita Disposable Income of Urban Households
2006 2007 2008 2009 2010 2011 2012 CAGR
RMB Tianjin ...... 14,283 16,357 19,423 21,402 24,293 26,921 29,626 12.9%
Source: China Index Academy
Urbanization
2006 2007 2008 2009 2010 2011 2012 CAGR
% Tianjin ...... 75.7 76.3 77.2 78.0 79.6 80.5 81.6 –
Source: China Index Academy
Fixed Asset Investment
2006 2007 2008 2009 2010 2011 2012 CAGR
RMB million Tianjin ...... 184,980 238,864 340,411 500,632 651,142 751,067 887,131 29.9%
Source: China Index Academy
80 INDUSTRY OVERVIEW
The table below sets forth key statistics relating to the residential real estate market of Tianjin for the periods indicated:
Total Residential GFA Under Development
2006 2007 2008 2009 2010 2011 2012 CAGR
sq.m. million Tianjin ...... 34.0 37.5 43.1 45.2 51.2 66.2 69.2 12.6%
Source: China Index Academy
Total Residential GFA Completed
2006 2007 2008 2009 2010 2011 2012 CAGR
sq.m. million Tianjin ...... 13.1 14.0 14.9 15.8 16.0 16.5 19.1 6.5%
Source: China Index Academy
Total Residential GFA Sold
2006 2007 2008 2009 2010 2011 2012 CAGR
sq.m. million Tianjin ...... 13.3 14.0 11.4 14.6 13.0 13.7 15.1 2.1%
Source: China Index Academy
Total Residential Property Transaction Volume
2006 2007 2008 2009 2010 2011 2012 CAGR
RMB million Tianjin ...... 61,951 78,163 63,557 96,536 103,432 116,736 121,057 11.8%
Source: China Index Academy
ASP
2006 2007 2008 2009 2010 2011 2012 CAGR
RMB/sq.m. Tianjin ...... 4,649 5,576 5,598 6,605 7,940 8,548 8,010 9.5%
Source: China Index Academy
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The table below sets forth the forecasted demand and supply of residential properties in Tianjin based on the estimated total residential GFA sold in the periods indicated:
Estimated Total Residential GFA Sold 2013 2014 2015 sq.m. million Tianjin...... 14.5 14.7 14.9
Source: China Index Academy
Chongqing
Chongqing is the only centrally direct-controlled municipalities in the PRC that is located in inland China. Chongqing is located within Sichuan Province and is the largest direct-controlled municipality, with significant history and culture and serves as the economic center of mid-western China. It is a major manufacturing center and transportation hub in China and is considered as one of the top economic centers in China. From 2006 to 2012, Chongqing’s nominal GDP grew at a CAGR of 19.6%, its fixed asset investment grew at a CAGR of 25.1% and per capita disposable income of urban households grew at a CAGR of 12.1%. The table below sets forth certain general economic statistics for Chongqing for the periods indicated:
Nominal GDP 2006 2007 2008 2009 2010 2011 2012 CAGR RMB million Chongqing ...... 390,723 467,613 579,366 653,001 792,558 1,001,137 1,145,900 19.6%
Source: China Index Academy
Per Capita Disposable Income of Urban Households 2006 2007 2008 2009 2010 2011 2012 CAGR RMB Chongqing ...... 11,570 12,591 14,368 15,749 17,532 20,250 22,968 12.1%
Source: China Index Academy
Urbanization 2006 2007 2008 2009 2010 2011 2012 CAGR % Chongqing ...... 46.7% 48.3% 50.0% 51.6% 53.0% 55.0% 57.0% –
Source: China Index Academy
Fixed Asset Investment 2006 2007 2008 2009 2010 2011 2012 CAGR RMB million Chongqing ...... 245,184 316,151 404,525 531,792 693,480 768,587 938,000 25.1%
Source: China Index Academy
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The table below sets forth key statistics relating to the residential real estate market of Chongqing for the periods indicated:
Total Residential GFA Under Development
2006 2007 2008 2009 2010 2011 2012 CAGR
sq.m. million Chongqing ...... 66.6 81.8 91.7 103.4 137.5 159.2 170.0 16.9%
Source: China Index Academy
Total Residential GFA Completed
2006 2007 2008 2009 2010 2011 2012 CAGR
sq.m. million Chongqing ...... 17.0 17.7 19.5 23.9 21.8 28.3 33.9 12.2%
Source: China Index Academy
Total Residential GFA Sold
2006 2007 2008 2009 2010 2011 2012 CAGR
sq.m. million Chongqing ...... 20.1 33.1 26.7 37.7 39.9 40.6 41.1 12.6%
Source: China Index Academy
Total Residential Property Transaction Volume
2006 2007 2008 2009 2010 2011 2012 CAGR
RMB million Chongqing ...... 41,870 85,673 70,482 123,171 161,064 182,541 197,242 29.5%
Source: China Index Academy
ASP
2006 2007 2008 2009 2010 2011 2012 CAGR
RMB/sq.m. Chongqing ...... 2,081 2,588 2,640 3,266 4,040 4,492 4,805 15.0%
Source: China Index Academy
83 INDUSTRY OVERVIEW
The table below sets forth the forecasted demand and supply of residential properties in Chongqing based on the estimated total residential GFA sold in the periods indicated:
Estimated Total Residential GFA Sold
2013 2014 2015
sq.m. million Chongqing...... 42.5 43.6 44.7
Source: China Index Academy
PRICES OF KEY CONSTRUCTION MATERIALS
According to the public information available from Bloomberg, annual average market price of steel increased from RMB4,084 per ton in 2010 to RMB4,705 per ton in 2011 and decreased to RMB3,916 per ton in 2012. In the first six months ended June 30, 2013, average market price of steel amounted to RMB3,611 per ton. Price of coking coal, a major component in the production of concrete, increased from RMB1,931 per ton in 2010 to RMB2,034 per ton in 2011 and decreased to RMB1,750 per ton in 2012. In the first six months ended June 30, 2013, average market price of coking coal was RMB1,618 per ton.
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