The year 2021 was the first year of the 14th Five-year Plan of China. Although faced with the complex and grave domestic and external situation and numerous risks and challenges, under the strong leadership of the state, China’s results in the fight against the pandemic attracted the world’s attention and the society and economy gradually recovered. At the same time, as vaccination programmes have widely commenced in major countries, people are optimistic about the economic outlook after the pandemic.
During the first half of the year, there were an obviously large number of transactions in China’s real estate industry. The area transacted in the 100 cities reached a historical high over corresponding periods, driving the results performance of real estate sales. The land auction market was even filled with optimistic sentiments. However, in the second half of 2021, with the continuous tightening of real estate control policies and the continuous cooling of the economy, the enthusiasm of home buyers suddenly cooled down, the real estate market deteriorated rapidly and the environment for property developer financing almost froze suddenly. The various unfavourable factors worked together to put unprecedented pressure on the sector. Most property developers experienced difficulties in liquidity. With companies competing to sell inventory, the situation of the industry was even direr. The year 2021 was the year with the most stress and the most dismal market conditions in the history of China’s real estate industry.
Steady and sound development has always been the Group’s priority strategy. Although the Group had taken a decisive step at the beginning of the year to contract its business, suspend all land acquisitions and investments, and focus its resources on driving the urban renewal project at Fengwei Village, Guangzhou with an area of approximately 2,000,000 sq.m., the sudden emergence of tremendous difficulties in the industry was still chilly. I together with my team led the Group to cope with the situation calmly to realize revenues of approximately RMB7,700 million for the year, which is about the same level as for the same period last year. We vigorously drove a development strategy of refocusing on the Guangdong-Hong Kong-Macao Greater Bay Area with Guangzhou as the centre, and on the basis of the successful bidding of the Fengwei Village project in late 2020, we paid close attention to driving the planning, construction application, and financing work of our projects. At present, the various tasks are progressing as planned. At the same time, the Group determinedly and vigorously started an asset disposal plan and such strategies as strengthening capital recovery, attaching great importance to cash flow safety. During the Year, the Group repaid in cash the principal of and interest on foreign US dollar-denominated debts amounting to approximately US$200 million, protecting the rights of creditors and the Group’s cash flow safety and demonstrating the resilience of the Group’s development. In 2021, the Group recorded a gross profit of approximately RMB1,700 million (with a gross profit margin of approximately 22.1%) and a loss attributable to shareholders of approximately RMB280 million. Mainly due to the comprehensive measures proactively taken by the Group mentioned above in response to the deterioration of the market of the industry and severe competition, as well as for the sake of caution, the Group increased its provision for financial assets. All these transitional measures put pressure on the Group’s profit in 2021. As at 31 December 2021, the Group had a project portfolio and potential land reserves in aggregate gross floor area of 33,000,000 sq.m., which were mainly residential projects and were mainly located in the Guangdong-Hong Kong-Macao Greater Bay Area, second-tier cities, and surrounding cities. These land reserves provide us with a favourable development base for the foreseeable future.
As the speed of China’s GDP growth gradually reduces and the real estate industry of China has greatly improved the living conditions of Chinese people over the last 20-odd years, we believe that the “great era” of real estate in China has passed. It is still a realistic choice to actively welcome a “small era”. The year 2021 is a watershed in the history of property development in China.
Although “housing is for living but not for speculation” is still the general keynote of the central government, the emphasis is on implementing policies according to the situation of the city to promote the healthy development of the property development sector. Some local governments have also started to relax demand-side restrictions. The China Banking and Insurance Regulatory Commission also encourages commercial banks to meet the reasonable demand of 300 million “new citizens” for home loans. We anticipate that government policies will focus on stabilizing property investments this year, and subsequently the stringent restrictions on property developer financing may be gradually relaxed, though it will take some time for market confidence to be restored but the light is at the end of the dark tunnel.
The Group’s future strategy will focus more on the operational efficiency of its projects. The overall tone will be to refocus on the Guangdong-Hong Kong-Macao Greater Bay Area with Guangzhou as the centre. The Group will cultivate projects with lucrative profit potential, continue to advance its plan to acquire the other 4,700,000 sq.m. of land in Guangzhou through urban renewal projects, determinedly expand the disposal of assets and accelerate the selling of inventory to contract its business, attach great importance to the Group’s cash flow safety, and continuously strengthen its developmental resilience. At the same time, it will stay acute and prudently evaluate development opportunities in other areas so as to secure new points of growth for the Group.
Being the chairman of the Board and also the chief executive officer of the Company, I would also like to express my sincere gratitude to all our staff, customers, suppliers and business associates, creditors and shareholders for their unwavering assistance and support to the Group in the past years.
Hong Kong, 31 March 2022