Xinhua Far East Downgrades Dongfeng Electronic Technology Co. Ltd to BB+ Issuer Rating, Rating Outlook Changed from Stable to Negative

Xinhua Far East Downgrades Dongfeng Electronic Technology Co. Ltd to BB+ Issuer Rating, Rating Outlook Changed from Stable to Negative

March 21, 2006

    HONG KONG, March 21 /Xinhua-PRNewswire/ -- Xinhua Far
East China Ratings today downgraded Dongfeng Electronic
Technology Co. Ltd ("Dongfeng Tech" or "the
Company", SH A 600081) from BBB- to BB+ domestic
currency issuer credit rating. The rating outlook is also
changed from stable to negative.

    The rating action was prompted not only by Xinhua Far
East's concern about the intensifying competition in
China's auto market and the resultant pressures on the
Company's OEM auto parts business, but also by Dongfeng
Tech's lagging market position, with its comparatively
small scale, weak R&D capabilities and loose cost
controls.  The downgrade also incorporates the Company's
unstable cash flow status, impaired debt repayment
capability and rising liquidity risk. 

    One positive factor preventing the Company from
receiving a lower rating is Dongfeng Motor Corporation's
("DFM") support for the Company.  DFM is willing
and able to continue propping up the Company in the short
run; however, there are uncertainties in respect to its
support in the long run as DFM itself faces even fiercer
competition.  The Company's rating outlook is changed to
negative considering these uncertainties.

    While the Company's sales to related companies
accounted for more than 40% of its total sales annually
from 2001 to 2005, during the same period, CAGR of Dongfeng
Tech's turnover was lower than that of both related
downstream automakers and the China auto industry average. 
In Xinhua Far East's view, the benefits from related parties
will diminish, with internal purchases becoming increasingly
market-oriented as automakers get squeezed by excess
capacity and price wars.

    Meanwhile, Xinhua Far East notes that deteriorating
debt positions and increasing liquidity risks weigh heavy
on the Company.  By the end of 2005, Dongfeng Tech's gross
debt to total capital had risen to 52.3% from 26.1% in
2002, and its debt repayment ability had become
significantly impaired with profit drying up over the
previous years.  Its EBIT interest coverage dropped from
8.2 in 2002 to 1.7 in 1H05 and turned negative for the
whole year of 2005. Current ratio recorded at 0.77 at the
end of 2005. 

    The Company announced plans to improve its performance
through R&D enhancement and efficiency improvement, and
Xinhua Far East expects the Company will keep looking for
opportunities to boost the process and expand its product
lines by setting up new joint ventures and M&As. 
Xinhua Far East believes capital expenditure will rise,
resulting in an even tighter cash flow status for the
Company.

    Dongfeng Electronic Technology Co. Ltd. is one of the
most significant auto part manufacturers in China.  Two
ultimate shareholders of the Company are Dongfeng Motor
Corporation, the third largest auto group in China, and
Nissan Motor Company.  The Company operates as an OEM
supplier to Dongfeng Motor Corporation.  In 2004 and 2005,
Dongfeng Tech's turnover recorded at RMB816 million and
RMB904 million respectively, in which sales to related
companies accounted for more than 40%.  Dongfeng Tech
produces such parts as combined auto meters and related
sensors, oil supply systems, brake systems and casts.
    For the rating report summary, please visit
http://www.xinhuafinance.com/creditrating .

    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]
     Tel:   [phone]
     Tel:   [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