Xinhua Far East Confirms Chongqing Changan Automobile Co., Ltd.'s BBB Issuer Rating; Rating Outlook Changed from Stable to Negative

Xinhua Far East Confirms Chongqing Changan Automobile Co., Ltd.'s BBB Issuer Rating; Rating Outlook Changed from Stable to Negative

March 31, 2006

    HONG KONG, March 31 /Xinhua-PRNewswire/ -- Xinhua Far
East China Ratings today confirmed the BBB domestic
currency issuer credit rating of Chongqing Changan
Automobile Co., Ltd. ("Changan Auto" or "the
Company," SZ A 000625, B 200625); its rating outlook,
however, was changed from stable to negative.

    The outlook change incorporates Xinhua Far East's
negative view on the toughening Chinese automotive market,
concerns about the Company's pricing power in the
mini-vehicle submarket, doubts about the sustainability of
growth of its self-branded products, as well as
expectations that its capital expenditure will rise in the
near term.

    Competition in China auto market is getting fierce due
to lower than expected demand growth and overcapacity. 
Changan Auto will not resume its monopolistic position in
mini-vehicle submarket over the foreseeable future as its
immediate follower, SGM Wuling, has occupied a 30% share of
the submarket.

    Price competition has intensified in the mini-vehicle
category and, even though it enjoys rapid sales growth,
this growth has been unable to offset the negative effect
on earnings by widespread price cutting.  Changan Auto's
profit margin fell significantly in 2004 and Q305 following
the Company's decision to cut prices to maintain its
position in the market.  The contributions from its sedan
business failed to offset downward pressures in the
mini-vehicle category. 

    Furthermore, Xinhua Far East is concerned about whether
Changan Auto's self-branded products can compete with giant
players and achieve sustainable growth.  Changan Auto
Group's ("Changan Group," the Company's
controlling shareholder) ambitious strategic plan may also
lead to higher capital expenditure and stretch its
financial flexibility in the short term.

    But despite the challenges faced by its mini-vehicle
business, the Company's position in the sedan segment has
been given a boost with the release of more competitive
models as a result of its cooperation with global giants. 
Xinhua Far East also believes the Company has the ability
to cushion further profit margin drops in the OEM sedan
market by releasing readily marketable models and
increasing the localization rate of parts and components.
Falls in profit margins are expected to be smaller in the
mini-vehicle segment, with far less aggressive price
cutting anticipated in the future.

    These factors, along with the Company's adequate debt
repayment ability (as evidenced by its cash reserves,
sufficient financial flexibility and liquidity), prompted
the confirmation of the Company's BBB rating. 

    It should also be noted that on 9 February 2006, the
Company announced that Changan Group would transfer its
52.47% stake in Changan Auto to China Southern Industrial
Auto Limited (the controlling shareholder of Changan
Group).  However, Xinhua Far East expects this transaction
will not have a significant impact on Changan Auto's
operations and credit profile.

    Chongqing Changan Automobile Co., Ltd. is currently a
controlled subsidiary of Changan Auto Group, the fourth
largest auto group in China.  By the end June 2005, Changan
Auto Group held a 52.47% stake in the Company.  The
Company's turnover was RMB18.5 billion and RMB13.4 billion
in 2004 and 3Q05 respectively.  The Company is the
strategic co-partner of Ford Motor Company and Suzuki Motor
Corporation in China.  It produces sedan models, including
the Mondeo, Fiesta, Focus and Swift, as well as
self-branded mini-vehicles.

    Changan Auto is a large-cap company constituting the
Xinhua/FTSE China 200 and B35 Indices.  As of March 30,
2006, its total A-share market cap equaled RMB6.2 billion,
with investable market cap of RMB1.9 billion.  Its B-share
market value was USD205million, of which all is
investable.

    For the rating report summary, please visit
http://www.xinhuafinance.com/creditrating .

    Note to Editors:

    About Xinhua FTSE China 200 and B35 Indices

    Xinhua FTSE China 200 Index is the large cap index in
the Xinhua FTSE China A Share Index Series and includes the
top 200 companies in China by market cap.  It is designed as
a tradable index and is calculated in real-time every 15
seconds.  Xinhua FTSE China B 35 Index is the large cap
tradable index in the FTSE Xinhua China B Index Series,
covering `B' shares listed on the Shanghai and Shenzhen
stock exchanges.  It provides international investors with
exposure to the mainland Chinese market.  For daily data
and further information, see http://www.xinhuaftse.com .

    About Xinhua Far East China Ratings

    Xinhua Far East China Ratings (Xinhua Far East) is a
pioneering venture in China that aims to rank credit risks
among corporations in China.  It is a strategic alliance
between Xinhua Finance (TSE Mothers: 9399), and Shanghai
Far East Credit Rating Co., Ltd. Shanghai Far East became a
Xinhua Finance partner company in 2003 and the first China
member of The Association of Credit Rating Agencies in Asia
in December 2003. 

    Capitalizing on the synergy between Xinhua Finance and
Shanghai Far East, Xinhua Far East's rating methodology and
process blend unique local market knowledge with
international rating standards.  Xinhua Far East is
committed to provide investors with independent, objective,
timely and forward-looking credit opinions on Chinese
companies.  It aims to help investors differentiate the
credit risks among the corporations in China, thereby,
cultivating their awareness and promoting information
disclosures and transparency in China market.  For more
information, see http://www.xfn.com/creditrating .

    About Xinhua Finance Limited

    Xinhua Finance Limited is China's unchallenged leader
in financial information and media, and is listed on the
Mothers board of the Tokyo Stock Exchange (symbol: 9399)
(OTC ADRs: XHFNY).  Bridging China's financial markets and
the world, Xinhua Finance serves financial institutions,
corporations and re-distributors through four focused and
complementary service lines: Indices, Ratings, Financial
News and Investor Relations.  Founded in November 1999, the
Company is headquartered in Shanghai with 21 news bureaus
and offices in 18 locations across Asia, Australia, North
America and Europe. For more information, please visit
http://www.xinhuafinance.com . 
 
    About Shanghai Far East Credit Rating Co., Ltd

    Shanghai Far East Credit Rating Co., Ltd. is the first
and leading professional credit rating company with
comprehensive business coverage in China.  It is an
independent agency established by the Shanghai Academy of
Social Sciences with the mission to develop internationally
accepted standards for capital market in China.  The company
is a pioneer in conducting bond-rating business in China. 
For years, it has been authorized by the Shanghai branch of
the PBOC to undertake loan certificate credit rating.

    Since establishment, it has rated over 1,000 corporate
long-term bonds and commercial papers, based on the
principles of objectivity, fairness and independence.  The
company has also maintained over 50% market share in the
loan certificate-rating sector in Shanghai for three
consecutive years.  With its strong local presence and
knowledge, it provides investors with unique and the most
insightful credit opinion.  For more information, see
http://www.fareast-cr.com .

    For more information, please contact:

    Hong Kong
     Joy Tsang, 
     Corporate & Investor Communications Director, 
     Xinhua Finance
     Tel:   [phone] or
[phone] 
     Email: [e-mail]

    US
     David Leeney, 
     Taylor Rafferty (IR/PR Contact in US)
     Tel:   [phone]
     Email: [e-mail]

SOURCE  Xinhua Far East China Ratings