DEAR SHAREHOLDERS,
I hereby present the Chairman’s Statement of 2022 on behalf of the Board of China New Town Development Company Limited (hereinafter referred to as the “Company” or “China New Town”, together with its subsidiaries, the “Group”).
CONTINUOUSLY STABLE DEVELOPMENT OF THE DOMESTIC ECONOMY
In 2022, against the backdrop of changes unseen in a century, coupled with the challenging situations arising from the global pandemic, the geopolitical landscape in turmoil, the increasing downward risk of the world’s economy, the domestic economy was impacted by various repeated impacts beyond our expectations such as dotted and multiple epidemics, the extreme heat, triple pressures of demand contraction, supply shock, and expected weakening, such that the complexity, seriousness and uncertainties of the development environment were increasing. Faced with the changing international environment and the arduous and onerous domestic reform and development stability task, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping as its core, China followed the general principle of making progress while working to keep performance stable, coordinated the epidemic prevention and control as well as economic and social development in an efficient manner, effectively responded to the internal and external challenges, so that the national economy continued to develop under pressure, the economic aggregate entered a new stage, employment and prices were stable as a whole, people’s living standards continuously improved, a new achievement was harmonious and stable.
Gross domestic product (“GDP”) amounted to RMB121 trillion throughout the year 2022, calculated by the unchanged price, representing an increase by 3.0% as compared to last year. China stepped into a new stage upon successively reaching over RMB100 trillion and RMB110 trillion in 2020 and 2021, respectively. From the perspective of per capita level, in 2022, China’s per capita GDP amounted to RMB85,698, representing an actual increase by 3% as compared to last year; calculated by the annual average exchange rate, such GDP reached US$12,741, which kept over US$12,000 for two consecutive years. The economic aggregate and per capita level continued to improve, which meant that our national comprehensive power, social production, international influence as well as people’s living standards were further enhanced, also meant that our national development base was more solid, development quality was better, and development momentum was richer and meant that our national economic resilience was strong with huge potential and wider space, and there is no change in the long-term good prospects.
2022 was also an important year for the Group’s reform and transformation. In the face of the complex and changing economic situations at home and abroad, the Company adhered to the guide of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, under the support of shareholders, namely, Wuxi Communications Industry Group Co., Ltd. (hereinafter referred to as “Wuxi Communications”) and China Development Bank Capital Corporation Limited (hereinafter referred to as “CDB Capital”), the staff unified their thought and changed their idea, actively responded to new situation, sought new direction, embraced new challenges, continued to keep stable while making progress in the Company’s reform and transformation, thereby looking for a new business development directions.
LEVERAGING ON SHAREHOLDERS’ RESOURCES AND ADVANTAGES AND FOCUSING ON KEY RANGE
2022 was the first full financial year for the Company to achieve a mixed ownership structure as a “local state-owned enterprise + central financial institution”. Wuxi Communications, the largest substantial shareholder, is a large state-owned enterprise under the direct supervision of Wuxi Municipal Government. It is actively performing the development strategy of promoting regional economic development and promoting “going out” of business. It is precisely because of the strategic plan that in 2021, Wuxi Communications launched and finally completed the acquisition of the equity interests of the Company, and the Company became the first platform for Wuxi Communications listing in Hong Kong since then. Given its business development strategy of “transportation, engineering construction, aviation industry, transportation technology and manufacturing, transportation finance and investment”, Wuxi Communications will build the Company a platform entity integrating “investment + construction + industrial investment + operation” leveraging on the resources of CDB Capital in the financial industry.
Wuxi, as a key economic region in Jiangsu, has a good industrial resource base and has first-mover advantages in integrated circuits, biomedicine and other industries. It plans to vigorously develop strategic emerging industries during the 14th Five-Year Plan, including the Internet of Things, high-end manufacturing, artificial intelligence, to build a base for advanced manufacturing in the world. The resource advantages and development of Wuxi can provide a good industrial implementation base for investment targets in emerging industries identified during the Group’s business transformation, and support the business development of the Group.
Given the different resource endowments and advantages of the substantial shareholders, the Company organized a team to conduct in-depth analysis and research on national policies, industry dynamics and market environment, to research the development direction of shareholders’ business and industrial layout, especially the industrial development advantages in Wuxi, and uncover the team’s investment and research capabilities. Based on the Company’s development strategy, by actively increasing appropriate investments in industries that are in line with the development prospects of the new economy, such as big health industries, strategic emerging industries, and information technology application innovation, we accumulated relevant experiences and focused on key range. Meanwhile, the Company accelerated the disposal of certain existing inefficient assets and maintained the operation of high-quality assets stably to stabilize fixed-income investment portfolios and implement the “three-step” implementation strategy of “disposing of non-performing assets, reinforcing capital and improving quality”.
ACCELERATING THE EXPANSION OF PROJECT RESERVES AND EXPLORATING THE DIRECTION OF PRINCIPAL BUSINESS BY TAKING EQUITY INVESTMENT AS THE OPPORTUNITY
Based on the Company’s development strategy, taking consideration of the shareholders’ resource advantages, the Group actively explore the project resources in the target industry. In 2022, the Company focused on various segregated ranges such as semi-conductor, new energy, biomedicine, and intelligent vehicles for further research, implemented the post-investment management for the invested projects, while completing investment in certain new projects, and had accumulated various mergers and acquisitions projects, ensuring that the Company made corresponding preparation for principal businesses.
In respect of the exploration of principal business in the fixed income investment, the Group gave full play to the customers’ resource advantages accumulated previously, and made solid project development and preparation, so that no newly added risk project occurred throughout the year and several projects were injected capital in 2022. As of 31 December 2022, the balances of the fixed income investment portfolio recovered to RMB1.544 billion, achieving the annual expected target.
OPERATING QUALITY ASSETS STABLY AND ACCELERATING THE DISPOSAL OF CERTAIN EXISTING INEFFICIENT ASSETS
Based on the actual condition of existing projects, the Company has implemented classified management to ensure project safety, operated quality assets stably and accelerated the disposal of inefficient assets. The Optical Valley project in Wuhan held by the Group overcame the adverse impact of the epidemic and unfavorable policies in tenant industry and maintained a stable occupancy rate, the office building of which maintained an occupancy rate over 97% throughout the year while the occupancy rate of commercial stores reached above 85%. Meanwhile, the Company developed the operation and management policy for K12 school projects in line with the national education policy, to ensure that primary and middle schools could commence on 1 September 2022. Newly student enrollment in 2022 was 140, far more ahead of the scale of local comparable schools. The social reputation in less than three years since our school’s establishment has been demonstrated, forming our core competitiveness of “building an international school with certain characteristics and influence”.
The Company accelerated the disposal of existing Shenyang Lixiang project. Due to the various impacts such as the epidemic and the adjustment and control of property, the financial conditions of the government were tight and the financing was not implemented as schedule, so that the counterparty could not delist as schedule. Given such actual situation, the Company initiated the negotiations on the overall withdraw plan with the government, and found out the fund issue for delisting transaction with the government in Hunnan District, Shenyang through several rounds of communications. However, since the expected tight financial revenue for the government in the short term, the board of directors and management of the Company were of the view that, there were material uncertainties for the performance of the original counterparty in the short term. Therefore, based on the prudent consideration, the Company provided impairment of RMB109 million for the risk projects in 2022. The Company will subsequently strengthen the communications with the government, thereby properly resolving the disposal of the project.
As of 31 December 2022, due to the impact on provision of impairment for the Shenyang Lixiang project, the Company recorded operating income of RMB406 million, net profit of RMB7.454 million and net profit attributable to the parent company of RMB2.702 million.
OUTLOOK FOR THE YEAR 2023
Looking ahead, 2023 will be the first year for the full implementation of the spirit of the 20th CPC National Congress and a crucial year for implementing “14th Five-Year Plan”. Notwithstanding the complex and serious external environment, the increasing risk for stagflation of the world’s economy, and the unsolid recovery basis for the domestic economy, China shows its strong economic resilience with huge potentials and rich vigor, and there is no change in the long-term good prospects, as well as resources factors and conditions can be support. As the epidemic prevention and control has entered a new stage, various policies have been continuously implemented, the production and life are expected to accelerate recovery, and the internal momentum for the economic growth will be accumulated and enhanced. In 2023, China’s overall economic goal will also be higher.
The Group will keep seeking investment opportunities prudently amid changes. By sticking to business transformation, in response to national guidelines and policies and being market-oriented, the Company will vigorously expand its investment business in new economic sectors such as big health industry, strategic emerging industry and information technology application innovation industry, continue to achieve the iteration and upgrading of “industrial fund + mergers and acquisitions”, “mergers and acquisitions and integration + extension” and “mergers and acquisitions + ecological improvement” according to the path of “clear principal business→integration and development→value enhancement” proposed in 2022, and continuously integrate and improve the Company’s overall value. Meanwhile, we operate quality assets stably and dispose of existing inefficient assets, steadily advance the premier development of the Company, and continuously create core value for shareholders in the long run.
In terms of fixed income investment, the Company will make full use of the financing function of the international financial market, select projects considering the resource endowment in different regions in China, and control investment risks and obtain stable source of profits under the principles of “safety, liquidity and profitability” to support the development of the principal business of the Company.
Equity investment in the new economic sector is the growth point of surplus profits. Based on the development goal of China’s new economy, the Company will screen opportunities for equity investment by selecting high-quality companies in strategic emerging industries, and seek to achieve higher investment returns through the establishment of industrial funds under the principles of “profitability, liquidity, and safety”.
As the largest shareholder of the Company, Wuxi Communications will provide all-round support including industrial resources, business synergy, financing and credit enhancement, to promote the further development of the Company.
Finally, on behalf of the Board, I would like to express my sincere gratitude to all shareholders, investors and partners for their unremitting support to the Company in the past year. Meanwhile, I would like to pay sincere heartfelt respects to the hard work of directors, management team and all staff. We will continue to strive to create more long-term interests and value for all shareholders.