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Chairman's Statement

Mr Cheung Shuen Lung

Dear shareholders,

Over the past year 2015, the growth of China’s economy has shown a downward trend, with a year-over-year GDP growth of 6.9% recorded, hitting a history low for twenty five years. With the overall sluggish economy, the stocks in real estate market remain high which has adversely hurt the enterprises’ desire to invest. In that context, the performance of various indicators representative of the real estate industry is barely satisfactory. In terms of the real estate projects that completed their development and investment, the growth dropped down for a consecutive nineteen months, reaching a lowest level on record, with rather poor performance of indicators such as acquired land area, newly constructed project area. However, such bad situation was improved by progressive recovery in sale volume as well as selling price of the real estate, since the government has successively launched policies to relax restrictions based on its firm determination to uphold the keynote of policy to destock and promote consumption. A growth in trading volume of real estates in the first-tier, second-tier and third-tier cities is recorded to a varying extent, with trading prices grow at a steady pace in the first-tier cities, but are clearly differentiated in the second-tier and third-tier cities.

In the face of the weak macro economy and complicated industrial situation, the Board has been able to consolidate its principal activity of real estate constantly with acute market sensibility, leading to a continuous growth in key operation indicators. The Group’s comprehensive transformation to a property developer was achieved through its acquisition of 12 projects under the parent, which was completed in January 2015, since when projects in cities such as Chongqing, Changsha, Foshan, Chengdu, Guiyang, Qingdao and Wuhan were gained. During the year, the Group has obtained the land use rights of 5 projects in 4 cities, namely Chengdu, Kunming, Hangzhou and Zhuzhou, through public transfer procedures, with an aggregate GFA of approximate 1.60 million sq.m., thereby further expands its footprint. As of 31 December 2015, the Group has 24 property development projects distributed in 14 cities, with GFA of the land bank up to 5,750,549 sq.m., among which, the projects in the first-tier and second-tier cities as well as in the third-tier and fourth-tier cities accounted for 71% and 29%, respectively. Meanwhile, the Group achieves a better balance of its business distribution among the first-tier, second-tier and third-tier cities by replenishing the land bank with selected
high-quality projects.

In 2015, the strategic transformation from “a traditional property developer” to “a property developer and living service provider” was accelerated. During which, the Group provides high-quality service for residents in communities in terms of finance, education, medical, culture, etc. through “two centers & one platform”, that is to take the new cultural center and community health care management center as physical carriers and to take the“Resources Home” community service network as platform to form an online and offline combined O2O service model.

As of 31 December 2015, the new culture centers of Jiangshan Mingmen and Yannan projects in Chongqing of our Group have been put into operation and the PKU health care community management center of the Jiangshan Mingmen project in Chongqing has been opened for business. During the year, the 2.0 version of the “Resources Home” community service network platform was launched, providing the residents in community with the convenience to enjoy healthcare, educational, money management and community service via network and mobile phone. Moreover, the branch of Peking University Kindergarten* (北京大學附屬幼兒園) within the Jiangshan Mingmen project in Chongqing and the branch school of the Affiliated High School of Peking University* (北京大學附屬中學) within the Yuefu project in Tianjin of our Group has started their operation, bringing about educational resources renowned at home and abroad from first-tier cities to the local community. Meanwhile, the branch school of the Affiliated High School of Peking
University within the Kaifeng PKU Resources City project is now under construction. Besides, the Group took the community as a platform to hold high-quality cultural activities, such as PKU Resources Hall, Peking University Archeology Summer Camp* (北大考古夏令營), Peking University Culture Night* (北大文化之夜) and Peking University art exhibitions, which enables the residents to achieve close encounter with the school culture of Peking University. At the same time, the Group discharges its social responsibility as a university-run enterprise by participating in public
cultural construction.

Looking into 2016, there will still be great downward pressure facing the macro economy in the face of multiple challenges such as weak foreign trades, declined investment, etc.. The development of the real estate industry will reach its peak from the perspective of long-term circle, while reaching its bottom from the perspective of short-term circle. Based on the central government’s keynote to ensure steady growth and destock, the government is determined to launch real estate policy to relax restrictions, indicating that there will still be ongoing policy dividend. Since January and February 2016, both the newly constructed area and investment in real estate have somewhat rebounded with the launch of loose policy in industry, but the trend will continue in a steady and differentiated manner as a whole. Some of the first-tier and second-tier cities, where the population continues its upwards trend, will remain the focused areas that generate strong demand. While in most of the third-tier and fourth-tier cities, it’s difficult to achieve increase in both sale volume and selling prices because of the high inventories and poor capability to attract population.

In that context, our Group will take health development of our enterprises as the first priority by practicing the development model of “quality plus resources” and “industry plus capital”, so as to realize synergetic development with high quality and features. In terms of quality, the Group will pay more attention to the enhancement of the quality of our products by focusing on the development of projects with high turnover rate and high gross margin and delivering fine, green, smart and humanistic residence that are customer-demand-oriented, thus improving the competitiveness of our products. In terms of resources, our Group will not only integrate the fine resources in education, healthcare, finance,culture and technology of Peking University and Founder Group, but also integrate the high-quality resources of our projects from local areas and other channels effectively, so as to create an open, inclusive and resources-integrated platform to proceed with “two centers & one platform”, thus enhancing the service ability of our communities. In terms of capital, our Group will put more focus on the access of industry to the capital market through joint bidding land, cooperative development, capital operation as well as consolidation and reorganization that can diversify risks and speed up our development.

I hereby express my heartfelt thanks to the management and all the staff for their hard works. We acknowledge that the trust from and support of our shareholders as well as the efforts and dedication of all the staff is what powers our development. Lastly, we are committed to be a leading integrated operating service company of urban life in The People’s Republic of China by continuing to pursue our goals to deliver maximum value for our enterprises, shareholders and even the society.

Cheung Shuen Lung

Mr Cheung Shuen Lung