Perennial Real Estate Holdings Limited - Annual Report 2017

MARKET TRENDS CHINA 1. CHINESE CENTRAL GOVERNMENT’S FOCUS ON LONG-TERM SUSTAINABLE GROWTH At the Communist Party of China’s National Congress in November 2017, President Xi Jinping outlined China’s five-year development objectives, with a focus on steering the country’s economy from high-speed to high-quality growth. The Central Government also announced its intention to push forward with structural supply- side reforms, deleveraging, economic liberalisation, poverty reduction and green initiatives. 1 While the rapid run-up in China’s property prices tapered off slightly in 2017, the Central Government continued to pursue tightening measures to maintain market stability, with President Xi Jinping repeatedly advocating that ‘homes are for living in, not for speculating on’. In the long term, the Central Government aims to put in place a housing system that ensures supply through multiple sources. 2 In particular, it will look to develop the market for rental housing. Land in various cities have been allocated for rental projects and the Central Government aims to introduce policies which improve the rights of tenants. The Central Government’s priority on achieving broad-based sustainable growth augurs well for the country’s long-term prospects. The property, retail and medical services sectors are expected to experience steady growth in the long run, driven by urbanisation, the growing affluence of the middle class and the government’s new economic focus. 3 -2.0 -0.5 1.0 2.5 4.0 5.5 7.0 8.5 10.0 11.5 2020F 2019F 2018F 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 % Annual GDP Growth China World Source: World Bank Global Economic Prospects January 2018 1 Reuters article dated 20 December 2017 (https://www.reuters.com/article/us-china-economy-conference/china-to-deepen-reform-keep-growth-steady-in- 2018-idUSKBN1EE12L). 2 Xinhua News article dated 17 February 2018 (http://www.xinhuanet.com/english/2018-02/17/c_136981520.htm ). 3 The Business Times article dated 30 January 2017 (http://www.businesstimes.com.sg/companies-markets/spore-businesses-eye-growth-in-china-despite- slowdown). 4 National Bureau of Statistics of the People’s Republic of China (http://www.stats.gov.cn/tjsj/zxfb/201802/t20180228_1585631.html ). 2013-2017 Average Annual Per Capita Disposable Income Source: National Bureau of Statistics of People’s Republic of China 4 2017 Breakdown of Per Capita Consumption Expenditure (%) Food, Beverage and Tobacco Products Transportation Education and Entertainment Medical and Healthcare Others Clothing Housing Daily Necessities 11.4 7.9 2.4 29.3 22.4 6.1 13.7 6.8 0 7,000 14,000 21,000 28,000 0 6 12 18 24 2017 2016 2015 2014 2013 RMB % Average Annual Per Capita Disposable Income 18,311 20,167 21,966 23,821 25,974 8.1 8.0 7.4 6.3 7.3 Year-on-Year (“ YoY ”) Real Growth in Average Annual Per Capita Disposable Income Annual Report 2017 34 PERENNIAL REAL ESTATE HOLDINGS LIMITED