DEAR SHAREHOLDERS,
I hereby present the Chairman’s Statement of 2023 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”).
WITH THE RECOVERY AND POSITIVE DEVELOPMENT OF DOMESTIC ECONOMY, THE GROUP’S RESULTS ACHIEVED GROWTH
In 2023, in the face of a complex and severe 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, departments in all regions conscientiously implemented the decision-making and deployment of the CPC Central Committee and the State Council, acted on the general principle of pursuing progress while ensuring stability, applied the new development philosophy in full, in the right way, and in all fields of endeavor and moved faster to create a new pattern of development, and deepened reform and opening up in all respects. We stepped up our effort on macroeconomic regulation and control, focusing on expanding domestic demand, optimizing structure, boosting confidence, and preventing and resolving risks. China’s economy has rebounded and improved, as indicated in steadily improved supply and demand, advanced transformation and upgrading, overall stable employment and prices, strong and effective livelihood protection, and solidly boosted high-quality development. With the main expected goals being successfully achieved, the building of a modern socialist country in all aspects has taken solid steps forward.
Gross domestic product (“GDP”) amounted to RMB126 trillion throughout the year 2023, representing an increase of 5.2% over the previous year calculated by the unchanged price. From the perspective of per capita level, China’s per capita GDP reached RMB89,358 in 2023, representing an actual increase of 5.4% over the previous year, while national per capita disposable income was RMB39,218, representing a nominal increase of 6.3% over the previous year, or an actual increase of 6.1% after deducting price factors. 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, the basic trend of China’s long-term economic growth remained unchanged, and the factors supporting the high-quality development of China’s economy have been rising.
2023 was critical for the Group to speed up adjusting its business structure and determine the direction of its principal business. Throughout the year, the Company adhered to the guide of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and upheld the spirit of the 20th National Congress of the CPC. 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 “CDBC” or “CDB Capital”), the Company followed the general principle of pursuing progress while ensuring stability and accelerated its business transformation and quality and efficiency improvement, thereby achieving hard-worn results.
As of 31 December 2023, the Company recorded operating income of RMB427 million, net profit of RMB151 million and net profit attributable to the parent company of RMB141 million.
FOCUSING ON BUSINESS TRANSFORMATION BY LEVERAGING ON SHAREHOLDERS’ RESOURCES AND ADVANTAGES
The Company’s mixed ownership structure as a “local state-owned enterprise + central financial institution” has laid a sound foundation for its development. 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 its business to go global.
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 has formulated its opinions on establishing “465” modern industrial system to accelerate the construction of key industry clusters, and planned 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”.
1. Upholding fundamental principles and breaking new ground by focusing on business transformation to its principal business and accelerating the transfer of investment direction and layout optimization of new business
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 2023, the Company continued to accumulate industry and project experience by way of exploring the transformation of its principal business through minority equity investment in terms of the exploration of its principal business, so as to make preparation for subsequent project mergers and acquisitions and clarifying the direction of its principal business. On the basis of post-investment management of invested minority equity projects, the Company focused on big health, high-tech, new energy resources and related industries, increased efforts on industry research, site visits, project analysis, evaluation and decision-making, and engaged in hundreds of projects throughout the year, completing the capitalization of minority equity projects in semi-conductor, new materials and other industries.
In December 2023, two subsidiaries of the Company entered into the Limited Partnership Agreement with Wuxi Guosheng Asset Management Company Limited* (無錫國晟資產管理有限公司) and Wuxi Tonghui Capital Company Limited* (無錫通匯資本有限公司) to establish a limited partnership. The establishment of the limited partnership will, on the one hand, bring more stable income to the Company and, on the other hand, the investment direction of the partnership will be prioritized in the areas of Internet of Things and integrated circuits, which will enable the Group to understand more about the market of the high-tech industry and seize the investment opportunities in the relevant areas under the favorable national policies, and to seek more opportunities for the Group’s business transformation by integrating with the industrial linkages in Wuxi region.
In respect of the exploration of its 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. In 2023, we invested 7 additional fixed-income projects, with a cumulative investment amount of RMB2.6 billion, and accelerated the transfer of the main investment places of the fixed-income business to developed regions in order to ensure the safety, liquidity and profitability of the funds. As of 31 December 2023, the balances of the fixed income investment portfolio recovered to RMB2.663 billion, achieving the annual expected target. There were no additional risk projects during the year.
2. One enterprise with one targeted Prioritizing the vitalization of existing projects and assets, improving the smooth operation of existing projects and orderly removing previous low-efficient 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 downward pressure on the macro economy and policies in tenant industry and maintained a stable occupancy rate, the office building of which maintained an occupancy rate over 93% throughout the year while the occupancy rate of commercial stores reached above 82%.
In addition, the Company will carry out operational management for the Nanjing International School Project (南京國際學校項目) in line with the national education policy, and are currently conducting high school qualification applications. We are also actively promoting the development of Property Development Project in Tiexin Bridge of Yuhuatai District, Nanjing, Beijing Junzhuang Project and Shenyang Lixiang Project, exploring feasible paths to revitalize idle assets.
3. Various measures have been taken simultaneously, with a focus on low-cost financing and efficient use of funds, achieving coordinated management and efficient use of domestic and overseas capitals
In 2023, with the guarantee and credit enhancement supported by Wuxi Communications, the Group has overcome multiple pressures such as tight schedule, heavy tasks, and significant uncertainty in the overseas capital market. It successfully issued RMB1.5 billion of Free Trade Zone Bonds, with a coupon rate of 3.98%, setting the lowest issuance rate for overseas listed Free Trade Zone Bonds in Jiangsu Province at that time, providing sufficient working capital for the Company’s business development. At the same time, the Group explored the effective path of capital exit in light of the business needs and made full use of the policy advantages related to the Hainan Free Trade Port and successfully formed the cash pool of Hainan Free Trade Port, which created a new model for the effective co-ordination of the use of domestic and overseas funds and the enhancement of the efficiency of the use of funds.
OUTLOOK FOR THE YEAR 2024
Looking ahead, despite the increasing complexity, severity, and uncertainty of the external environment, economic development still faces some difficulties and challenges. However, the opportunities still outweigh the challenges, and favorable conditions outweigh unfavorable factors. The basic trend of China’s long-term economic growth has not changed, and the factors that support high-quality development of the China’s economy are constantly accumulating and increasing. The China’s economy will continue to rebound and improve in 2024.
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”, 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 attach great importance to post investment management of existing projects, ensuring that all existing projects have no risk of principal and interest recovery. At the same time, the Company highlighted the safety and liquidity of new projects, actively explored new business models, fully tapped into potential and space, obtained stable profit sources, and strived to improve comprehensive investment returns while continuously optimizing the investment structure of fixed income projects.
Equity investment in the new economic sector should not only strengthen the management of invested projects based on the development and changes of macroeconomic and industry markets, take invested projects as the entry point, deeply cultivate and work in the industry areas we focus on, but also innovate work thinking, strengthen industry research around big health, high-tech, new energy, advanced manufacturing and other fields, increase access to high-quality projects, make prudent evaluation decisions, and actively seize opportunities to promote the investment layout of merger and acquisition projects.
We will forge ahead with firm determination no matter what difficulties and obstacles stand in the way. China New Town are on the path of accelerating strategic transformation and focusing on its principal business direction. Wuxi Communications, the largest shareholder of the Company, will provide comprehensive 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 relevant 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.