THE 21ST CENTURY: A REFOCUSING ON CORE BUSINESSES

In the opening years of this century of there was an increased emphasis on property investment and development in mainland China particularly in Shanghai and the fast growing cities of the Yangtze delta.

CITIC Hong Kong had been a pioneer in property development in Shanghai, building one of the city’s first modern office tower-CITIC Square- and an international standard apartment block –Royal Pavilion- both of which opened in 1998.

In January 2002 the company acquired these investment properties from CITIC Hong Kong and began foundation work on the New Westgate Garden residential development in Puxi. By 2005 CITIC Pacific had developments in progress or announced at several sites including the Qingpu district of Shanghai, the Shanghai Pudong Liu Jia Zui New Financial district project, and a commercial office development in Ningbo. The company had also acquired valuable land banks in other cities in the Yangtze River delta and Yangzhou and had signed an agreement to develop a large resort project on the Shenzhou peninsula on Hainan Island.

CITIC Pacific also directed more attention to special steel, increasing its interest in Jiangyin Special Steel Plant in 2004 and in the same year acquiring 95% of Xin Yegang in Hubei province and thereby also obtaining a majority interest in Shenzhen listed Daye Special Steel Company. In 2006 Shijiazhuang Steel became a member of the CITIC Pacific Group although the interest in this company was disposed of in 2010.

The group’s bridge and tunnel operations in Shanghai were sold in 2003 following a change of government policy which would not permit an adequate return in future.

In early 2006 CITIC Pacific, wishing to secure a long-term stable supply of iron ore for the group’s steel plants in China, acquired the rights to mine one billion tonnes of magnetite iron ore – with options for a further 5 billion tonnes in the Pilbara region of Western Australia.

From 2007 to the present day CITIC Pacific has continued its emphasis on developing its three core businesses, namely special steel manufacturing, iron ore mining, and property development in mainland China . In 2007 the rights to mine an additional one billion tonnes of ore at the mine in Western Australia were obtained.

In 2007, Dah Chong Hong and CITIC 1616 (currently named as CITIC Telecom International) were listed while remaining CITIC Pacific subsidiaries, raising capital for redevelopment to the main businesses.

In the following years the company divested itself of businesses over which the company did not exert management control or which were not essential to the strategic future of the group including power plants and the interest in Cathay Pacific.

In 2008 the group incurred losses of HK$14.6 billion on a number of foreign exchange contracts related to excessive hedging of the Australian dollar expenditure of the iron ore mine. The CITIC Group subscribed for additional capital of HKD2.5billion thereby increasing its shareholding in CITIC Pacific to 58%.

In 2010 CITIC 1616 (currently named as CITIC Telecom International) bought CITIC Pacific’s 20% stake in Macau Telecom, and bought 49% of a company with China telecom license from the CITIC Group, thereby consolidating telecom interests.

By 31 December 2012, CITIC Pacific’s three main businesses were over 70% of CITIC Pacific’s assets; iron ore make up 33%, special steel 22% and mainland China property 17%.