Xinhua Far East Confirms FAW Car Co., Ltd. BBB+ Issuer Rating, Rating Outlook Changed from Stable to Negative

Xinhua Far East Confirms FAW Car Co., Ltd. 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 FAW Car Co., Ltd.
("FAW Car" or "the Company", SZ A
000800); its rating outlook, however, was changed from
stable to negative.

    The outlook change reflects Xinhua Far East's view
about the diminishing attractiveness of China's sedan
market, which is currently characterized by overcapacity
and lower-than-expected growth in demand.  The rating
action also incorporates Xinhua Far East's concerns about
the Company's heavy reliance on sales of the Mazda 6 series
and its business concentration on China's medium- to
high-end sedan market. 

    With supply increasingly diverging from demand, China's
sedan sector faces long-term downward pricing pressures. 
Xinhua Far East also expects the Company's target market
may face greater price cut pressures, with more and more
new models expected to be launched and compete in this
niche as a result of its relatively high profit margins. 

    Moreover, the Company's less diversified product lines
and its increasing reliance on sales of the Mazda 6 magnify
its business risks, even though Mazda 6 sales are picking
up.  Nearly 85% of the Company's unit sales in 2005 came
from Mazda 6 models, which are targeted at the competitive
medium- to high- end of the domestic sedan market.  By
contrast, another of the Company's product lines, the
Hongqi series, saw unit sales fall by 44.3% and 40% YoY in
2004 and 2005 respectively.  It will take some time for the
Company to boost sales of the Hongqi series.

    Despite these factors, the Company is able to maintain
its BBB+ rating as a result of its relatively strong debt
repayment ability -- a result of a conservative financial
policy.  This is evidenced by its very low debt burden, its
adequate cash reserves and sufficient financial flexibility.
 Although FAW Car's profit margin dwindled significantly in
2004 and the first three quarters of 2005, the Company's
cash flow was not impaired to the same degree, thanks to
Mazda 6 unit sales and the Company's ability to shift
working capital pressures upstream.  The Company also has
the potential to cushion further profit margin drops
through its marketable models, the higher localization rate
of parts and components and the possibility of RMB
appreciation. 

    FAW Car Co., Ltd. is a controlled subsidiary of China
FAW Group Corporation ("FAW Group", China's
largest auto group).  By the end June 2005, FAW Group held
a 63.63% stake in the Company.  The Company reported
turnover of RMB9.64 billion and RMB6.93 billion in 2004 and
the first three quarters of 2005 respectively.  The Company
produces models including Mazda 6, Hongqi Mingshi and
Hongqi Shijixing.

    FAW Car is a large cap company constituting the
Xinhua/FTSE China 200.  As of March 30, 2006, its total
A-share market cap equaled RMB 5.5 billion, with investable
market cap of RMB 2.2 billion.

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

    Note to Editors:

    About Xinhua FTSE China 200 Index

    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.  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