NewWorld Development Company Limited
RISK FACTORS
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D. MAJOR RISK FACTOR ON SUBSIDIARIES
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New World China Land Limited (“NWCL”)
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12. NWCL’s property development business required substantial capital investment. NWCL will require additional
financing to fund working capital and capital expenditure, to support the future growth of its business and/or
to refinance existing debts obligations. NWCL’s ability to arrange for external financing and the cost of such
financing are dependent on numerous factors, including general economic and capital market conditions,
interest rates, credit availability from banks or other lenders, investor confidence in NWCL, success of its
businesses, provisions of tax and securities laws that may be applicable to NWCL’s efforts to raise capital and
political and economic conditions in the PRC. In additions, a substantial portion of NWCL’s borrowings are
linked to benchmark lending rates published by the PBOC. The PBOC has adjusted the benchmark one-year
lending rate a number of times in the past in response to the changing PRC and global financial and economic
conditions. As such, NWCL is exposed to foreign currency exchange risk, interest rate risk, credit risk and
liquidity risk.
New World Department Store China Limited (“NWDS”)
1. PRC Government announced that the expected GDP growth for 2015 is around 7% and it was 7% in both the
first and the second quarter of 2015 which is the lowest since the financial crisis. It is anticipated that GDP
would continue to decelerate modestly. As a result, it would inevitably affect, to certain extent, the disposable
income of citizens as well as personal consumption behavior, which in turn may have a negative impact on the
retail industry in the PRC.
2. This slowdown also causes an adjustment of economic structure which has brought great challenges to the
traditional industries, manufacturers and suppliers as well. Nowadays, industrial and commercial transformation
aiming to increasing efficiency, reducing pollution and eliminating irregular and unnecessary intermediaries is
being implemented. Consumers’ requirement to the products and services becomes more quality, functional
and environmental oriented. Therefore, it requires players in retail market to be more responsive, caring and
socially responsible in order to satisfy customers’ need.
3. Moreover, wage growth in China is not as fast as that of CPI, resulting in a decline of purchasing power. For
example, customers would prefer buying goods with lower price from the internet to the retail stores.
4. The retail market remained sluggish as relevant government policies and measure in the PRC exerted
significant pressure on the retail market, especially the luxury goods, shopping (stored value) cards sales and
group (bulk) purchase. Therefore, it is anticipated that these sectors will continue to underperform to a larger
extent as compared to other general goods and products.
5. The recent fluctuation in stock market in China created an undesirable sentiment which may affect consumers’
spending behavior and in turn retail market. The majority of consumers’ disposable funds have been stuck in
the stock market, which may result in a decline in purchasing power and weaker motivation of buying goods.
6. The purchasing power of people in China diminishes as a result of recent devaluation of RMB. It may affect
the demand for imported goods or products substantially made of or assembled from imported materials.
7. It shows that a total of 212 million Chinese were aged over 60 by the end of 2014, about 15.5% of the total
population and expects to take up 34% of population in 2050. The aging society can exacerbate the effects of
recession. The good news, however, is that many aging populations are healthier than previous generations
of senior citizens, and much more prosperous. So it would be a huge opportunity to the retail industry if they
could accurately identify and take advantage of this large segment of consumers’ preferences and habit.
