Xinhua Far East Puts Fuyao Group Glass Industry Co Ltd on Review for Possible Upgrade

Xinhua Far East Puts Fuyao Group Glass Industry Co Ltd on Review for Possible Upgrade

May 18, 2007

    HONG KONG, May 18 /Xinhua-PRNewswire/ -- Xinhua Far
East China Ratings ("Xinhua Far East") today
placed the BB+ issuer credit rating of Fuyao Group Glass
Industry Co Ltd ("Fuyao" or "the
company", SH A 600660) on review for a possible
upgrade.

    The rating action was prompted by expectations that
Fuyao's capital expenditure will slow and its operating
cash flow will improve as a result of its strengthening
position in the domestic and global auto glass markets. A
proposed private placement to Goldman Sachs would improve
its debt repayment capacity, providing further support to
its rating profile.

    The company has now completed major production bases
for the auto producer market, with its investments in auto
glass capacity likely to slow after its Beijing and
Guangzhou production bases are put into operation in 2007. 
Still, there are some concerns over ongoing capital
expenditure in its float glass lines in Hainan Province,
especially considering the company's historically
aggressive investment record.

    Its cash flow status has improved, with the gap between
CFO and CFI (outflow) narrowing over the past nine quarters.
This trend is expected to continue as a result of the
company's strengthening market position. Revenues from its
auto glass segment, which accounted for 74.3% of total
revenues in 2006, rose from RMB1, 064.2 million in 2002 to
RMB2, 888.9 million in 2006. The growth of this segment
resulted not only from domestic sales but also from its
global OEM business. Domestic sales have grown as a result
of growing auto sales and its leading market share.  In the
global OEM field, Fuyao has passed the verification process
of major world-class auto manufacturers, including Ford and
GM. Despite tough downstream competition, wavering domestic
demand for sedans and RMB appreciation, its profit margins
have remained comparatively stable, with its operating
efficiency improving slightly.

    A probable private placement to Goldman Sachs should
also lead to an improvement in its debt repayment capacity.
The company's investors approved on December 11, 2006 the
issue of 111.3 million A-shares to Goldman Sachs to raise
about RMB890 million, RMB710 million of which will be used
to repay long-term bank loans, with the rest to be used as
working capital. If the private placement goes ahead, the
company's gross debt/total capital ratio is expected to
decline by about 10 pct, not taking into consideration
dividend payouts or other large cash flow changes. We also
expect Goldman Sachs to help broaden Fuyao's export
channels.

    Xinhua Far East's estimates indicate that Fuyao's CFO
is sufficient for its planned capital investment in 2007,
although still not enough to lower its net debt
significantly in the near term. As a result, the new stock
issue will determine the timing for its rating upgrade.

    Fuyao Group Glass Industry Co Ltd is the largest auto
glass maker in China. Mr. Cao Dewang, the President of
Fuyao, and his wife, are the ultimate controllers of the
company, holding a 53.93% stake. The company has six auto
glass production bases located near major domestic auto
producers. Fuyao has also become the OEM supplier to world
auto giants including Ford, GM, Volkswagen and Hyundai.

    Fuyao is also a constituent of the Xinhua/FTSE China
200 Index and, as of market close on May 17, 2007, its
total A-share market capitalization and investable
capitalization were RMB23.4 billion and RMB9.36 billion
respectively. 

    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 premier financial
information and media service provider 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 five focused and
complementary service lines: Indices, Ratings, Financial
News, Investor Relations, and Distribution.  Founded in
November 1999, the Company is headquartered in Shanghai,
with offices and news bureaus spanning 14 countries
worldwide.  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] /
[phone]
     Email: [e-mail]

     Scott Zhang, 
     Tel:   [phone]
     Email: [e-mail]

    US
     Taylor Rafferty (IR/PR Contact in US)
     Mr. John P. Dudzinsky
     Tel:   [phone]
     Email: [e-mail]