In FY2011, NWCL recorded a profit of HK$3,025.8 million, representing an increase of 15% as compared with FY2010. The improvement in operating results from sale of property and hotel operation, as well as the appreciation of Renminbi during the year under review, were the key factors contributing to the significant growth. In particular, the relevant operating profit attributable to core business increased significantly to HK$4,296.2 million, representing a year-on-year increase of 137%.

Though the US economy has bottomed out, its pace of recovery has obviously slowed down. QEI and QEII have failed to boost the economy and the employment rate, not to mention the manufacturing industry. There are concerns that the current US economic crisis cannot be solved right away even with the unleashing of a new round of quantitative easing and a possible return to recession even with just slight market fluctuations.

As uncertainties linger over the European debt crisis, the default risk for countries like Greece, Italy and Spain keeps rising. To avoid the entire euro zone economy from being dampened by a domino effect if those countries were to default, the European Union, the European Central Bank and the governments of France and Germany tried their utmost to come up with a new bailout package. In addition, global economic growth and inflation have been worsening due to hiking crude oil prices as a result of the social unrest in some North Africa and Middle East countries.

While having rapid economic development in last decade, China is also linking closer and closer to the rest of the world. Nowadays, China has to devise national policies with the consideration of the situation of other major economies in the world. In late 2008, to mitigate the cooling effects of the global economic crisis due to the US sub-prime turmoil, the Central Government had decisively implemented proactive fiscal policy and easing monetary policy. Although the China economy had stabilised, this easing also simultaneously implanted the seeds of inflation.

With the global swamp of liquidity and the speculation of RMB appreciation, the pressure of domestic inflation in Mainland China had been intensified. In order to avoid imbalance of economy, The People's Bank of China has already raised the capital adequacy ratio and interest rate repeatedly. The gradual absorption of extra liquidity is targeted to ensure the steady growth of economy. A number of austerity measures on the property market had been rolled out by the Central Government since April 2010 for curbing property speculation and thus stabilising property prices and market development.

To take care of the underprivileged, Premier Wen Jiabao has just depicted publicly again the determination to provide affordable housing and has introduced the idea of public rental housing. This act is good for long-term development of housing market as the underprivileged will gradually migrate to middle income class with the government "subsidy". Like a lot of developed countries, the abundance of middle-income class is crucial for the healthy development of the property market.

Recently, apart from implementation of tightening measures on certain cities, the Central Government also allows a reasonable advancement of residential property prices based on local economic improvement such as GDP growth. It is expected by the market that the Central Government will further fine-tune those austerity measures in order to consolidate and enhance the positive results of austerity and effectively manage inflation to ensure stable development of the market in due regard to the situation of the local and the global economic development.

With a sound financial position of a low net gearing at 23% and sufficient credit facilities, the Group will be able to grasp market opportunities and respond to the challenge of the ever-changing market. Overall, the Group is cautiously optimistic about the Mainland China property market. We will continue our development plan to tap on the huge opportunities brought by the urbanisation in Mainland China according to the good side of the market. At the same time, we also hold a prudent approach in developing our Mainland China operations by appropriately adjusting our plan according to market and policy variations.

Dr Cheng Kar-shun, Henry
Chairman and Managing Director
Hong Kong, 29th September 2011