CONCENTRATION OF RISK

9 Months Ended

Sep. 30, 2011

CONCENTRATION OF RISK [Text Block]

4.	CONCENTRATION OF RISK
	Concentration of credit risk
	Assets that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, accrued straight-line rents receivable, trade receivable. As of September 30, 2011 and December 31, 2010, all of the Group’s cash and cash equivalents were deposited in financial institutions located in the PRC and Hong Kong, which management believes are of high credit quality. Trade receivable and accrued straight-line rents receivable are typically unsecured and are derived from revenue earned from customers in the PRC. The risk with respect to accrued straight-line rents receivable and trade receivable are mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring process of outstanding balances.
	Concentration of customers and suppliers
	A summary of the customers in the segment of trading business, who accounted for 10% or more of the Group’s consolidated revenues for the periods ended September 30, 2011 and 2010 are as follows:

	Nine months ended September 30,		Three months ended September 30,
	2011	2010	2011	2010
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Customer A	28%	*	*	*
Customer B	27%	27%	54%	52%
Customer C	17%	*	*	*
Customer D	*	15%	*	28%
Customer E	*	33%	*	*
Customer F	*	*	13%	*
Customer G	*	*	13%	*
Customer H	*	*	12%	*
Customer I	*	*	*	11%
Total	72%	75%	92%	91%

* less than 10%

In commercial properties leasing segment, there are no revenues from any customers for the periods ended September 30, 2011 and 2010 which individually represent greater than 10% of the total revenue.

The above customers accounted for 84% and 88% of accounts receivable balance as of September 30, 2011 and December 31, 2010, respectively.

The Group had three major suppliers that accounted for 65% of the total purchase of goods for the nine months ended September 30, 2011, and three major suppliers that accounted for 75% of the total purchase of goods for nine months ended September 30, 2010.

Meanwhile, the Group had two major suppliers that accounted for 51% of the total purchase of goods for the three months ended September 30, 2011, and one major supplier that accounted for 67% of the total purchase of goods for three months ended September 30, 2010.

The above suppliers accounted 67% and 7% of accounts payable balance as of September 30, 2011 and December 31, 2010, respectively.

Current vulnerability due to certain other concentrations

The Group’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than 30 years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.

The Group transacts all of its business in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China (the “PBOC”). However, the unification of the exchange rates does not imply that RMB may be readily convertible into US$ or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of foreign currency payments by the PBOC or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.

Additionally, the value of RMB is subject to changes in central government policies and international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market.