Xinhua Finance/Milken Institute Market-Adjusted Debt Indicator Update: MAD Indicator Remains Flat, Despite Equity Market Boom, in Fourth-Quarter 2006

Xinhua Finance/Milken Institute Market-Adjusted Debt Indicator Update: MAD Indicator Remains Flat, Despite Equity Market Boom, in Fourth-Quarter 2006

October 19, 2007

    SHANGHAI, China, Oct. 19 /Xinhua-PRNewswire/ --

    (Logo: http://www.xprn.com/xprn/sa/200611140926-min.gif
)

     Fourth quarter 2006:       15.6%
     Third quarter 2006:        15.5%
     Quarter-to-quarter change:  0.7%
     Fourth quarter 2005:       18.0%
     Year-to-year change:       -6.6%

    Click
http://www.xinhuafinance.com/en/charts/indicator/mad/mad_chart0710_b_en.jpg
to download the chart.

    Highlights

    The value of the Market-Adjusted Debt (MAD) Indicator,
which measures the capital structure of Chinese companies
using a long-term debt-to-equity ratio, is 15.6 percent for
fourth quarter of 2006, a 0.1 percentage point increase from
the previous quarter and 2.4 percentage point decrease from
the previous year. 

    Both outstanding debt and market value of companies
have increased, indicating that Chinese companies are
balancing debt with the market's assessment of capital.

    Analysis 

    The MAD indicator remained essentially flat in the
fourth quarter of 2006. Cyclical factors contributed to an
increase of the book value of outstanding long-term debt of
all companies, compared to the previous quarter.  At the
same time, the booming domestic equity market contributed
to a 49 percent average increase in the market value of
companies. 

    Domestic interest rates did not change in the fourth
quarter but remained at their highest level since 2002. 
Higher interest rates, an underdeveloped corporate bond
market, and higher price-to-equity ratios all contributed
to keeping the MAD indicator at a relatively low level at
the end of 2006.

    Some companies have experienced significant changes in
the book value of debt. At Shanghai Automotive, for
example, long-term borrowing increased by 5.2 billion Yuan
from September 2006 to December 2006, increasing its
long-term debt-to-capital ratio from 1.23 to 5.97.

    Methodology 
  
    There are two components in constructing a
market-adjusted debt indicator: the total market value of
debt and the total market value of equity.  The market
value of debt can be calculated based on book value of
long-term debt, the duration and coupon rate on the debt,
current comparable debt-market interest rates, and
weighting for different maturities.  The market value of
equity can be calculated by multiplying the price per share
of equity by the total shares of outstanding equity.

    Xinhua Finance/Milken Institute China Indicators 

    The Xinhua Finance/Milken Institute China Indicators
provide investors, analysts, and financial professionals
insight into China's money and capital markets.  Five of
the eight indicators have been launched since November
2006: the Renminbi Pressure Indicator, the Chinese IPO
Indicator, the Market Adjusted Debt (MAD) Indicator, the
Banking Strength Indicator (BSI), and the Adjusted Trade
and Finance (ATF) Indicator.  The remaining three
indicators (the China M&A Indicator, the China
Privatization Indicator, and the China Corporate Governance
Indicator) will be launched later this year. 

    Period Coverage and Frequency

    The indicator covers the period beginning with the
fourth quarter of 2003 and extends to the present.  Values
are calculated on a quarterly basis.  The availability of
current financial statements will determine the number of
included companies.

    Sources of Data 

    The data used in the construction of the indicator are
obtained from Xinhua Finance China Insight TM and
Bloomberg.

    To view additional information, visit
http://www.xinhuafinance.com/indicators and
http://www.milkeninstitute.org/chinaindicators . 

    Xinhua Finance Limited ("XFL") 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's
proprietary content platform, comprising Indices, Ratings,
Financial News, and Investor Relations, serves financial
institutions, corporations and re-distributors worldwide. 
Through its subsidiary Xinhua Finance Media Limited
(Nasdaq: XFML), XFL leverages its content across multiple
distribution channels in China including television, radio,
newspaper, magazine and outdoor media.  Founded in November
1999, XFL is headquartered in Shanghai, with offices and
news bureaus spanning 11 countries worldwide.  For more
information, please visit http://www.xinhuafinance.com . 

    The Milken Institute is a nonprofit, independent
economic think tank whose mission is to improve the lives
and economic conditions of diverse populations around the
world by helping business and public policy leaders
identify and implement innovative ideas for creating
broad-based prosperity.  The Milken Institute has extensive
expertise in China and conducts ongoing research on China's
banking and capital markets.  It is based in Santa Monica,
Calif. For more information, please visit
http://www.milkeninstitute.org . 


    For more information, please contact: 

    Xinhua Finance 

    China
     Ms. Joy Tsang
     Tel:   [phone] or [phone]
     Email: [e-mail]

     Mr. Scott Zhang
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     Email: [e-mail]

    Taylor Rafferty (Media contact for Xinhua Finance) 

    Japan 
     Mr. James Hawrylak
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    United States
     Mr. John Dudzinsky
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    Europe
     Faisal Kanth
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    Milken Institute 
     Ms. Jennifer Manfre, 
     Associate Director of Communications 
     Tel:   [phone]
     Email: [e-mail]