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Treasury China Trust Annual Report 2010 25

TRUSTEE-MANAGER’S REPORT

China has consistently demonstrated its capacity to manage complex economic issues and TCT remains confident that the economy will continue to support its growth strategy. China recorded a strong economic result in the face of significant challenges being experienced by its traditional trading partners in Europe and North America. As a consequence of its annual GDP growth of 10.3% for 2010, China achieved a global ranking second only to America by year-end, relegating Japan to third place in the process.

China GDP and its Growth Rate

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2005 2006 2007 2008 2009 2010

RMB billion

Total GDP (LHS) Growth Rate (RHS)

0%

2%

4%

6%

8%

10%

12%

14%

16%

Source: China National Statistics Bureau

Inflationary pressures are emerging across the country, whilst concerns regarding the unsustainable strength of the residential sector remain. This is offset by one of the highest savings rates in the world, high levels of equity for home acquisitions (loans represent less than 50% of purchase price on average) 1 , double-digit annual growth in urban wages for the past 5 years and China’s commitment to its ongoing urbanisation programme which transitions residents from a rural landscape to an urban environment in massive numbers, estimated at 15 million per annum 1 . These factors all contribute to genuine demand for owner-occupier housing which mitigates much of the risk associated with the concerns for unsustainable pricing of residential real estate prices.

China continues to invest heavily in its nation-wide infrastructure programme with a high-speed rail programme aiming to criss-cross the country in the next 5 to 10 years to match its existing massive investment in a road network that leads the world in size and quality. This investment in China’s future will continue to provide the economic basis for urban redevelopment across the country which directly and favourably impacts TCT’s decision to pursue regional expansion in the retail sector.

1 Source: People’s Bank of China and China National Statistics Bureau