The Group’s principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The Group has trade and other receivables, and cash and bank deposits that derive directly from its operations. The Group also holds quoted equity securities.

The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the management of these risks. There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures the risks.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, quoted equity securities and derivative financial instrument.

The sensitivity analyses in the following sections relate to the position as of December 31, 2020 and 2021.

The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and the proportion of financial instruments in foreign currencies are all constant at December 31, 2021.

The analyses exclude the impact of movements in market variables on provisions and on the

non-financial

assets and liabilities of foreign operations.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s interest-bearing bank deposits and loans and borrowings from banks and financial institutions. The interest-bearing loans and borrowings of the Group are disclosed in Note 26. As certain interest rates are based on interbank offer rates, the Group is exposed to cash flow interest rate risk. This risk is not hedged. Interest-bearing bank deposits are short to medium-term in nature but given the significant cash and bank balances held by the Group, any variation in the interest rates may have a material impact on the results of the Group.

The Group manages its interest rate risk by having a mixture of fixed and variable rates for its deposits and borrowings.

Interest rate sensitivity

The sensitivity analyses below have been determined based on the exposure to interest rates for bank deposits and interest-bearing financial liabilities at the end of the reporting period and the stipulated change taking place at the beginning of the year and held constant throughout the reporting period in the case of instruments that have floating rates. A 50 basis points increase or decrease is used and represents management’s assessment of the possible change in interest rates.

If interest rate had been

50 (2020: 50)

basis points higher or lower and all other variables were held constant, the profit before tax for the year ended December 31, 2021 of the Group would increase/decrease by

RMB 15.4 million (US$ 2.4 million) (2020: increase/decrease by RMB 20.9 million).

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s sales, purchases and financial liabilities that are denominated in currencies other than the respective functional currencies of entities within the Group. The Group also holds cash and bank balances and other investments denominated in foreign currencies. The currencies giving rise to this risk are primarily the Singapore Dollar, Renminbi, US Dollar and Euro.

Foreign currency translation exposure is managed by incurring debt in the operating currency so that where possible operating cash flows can be primarily used to repay obligations in the local currency. This also has the effect of minimizing the exchange differences recorded against income, as the exchange differences on the net investment are recorded directly against equity.

The Group’s exposures to foreign currency are as follows:


	31.12.2020
	Singapore Dollar			Euro			US Dollar			Renminbi			Others
	RMB’000			RMB’000			RMB’000			RMB’000			RMB’000
Quoted equity securities		6,258			—			—			—			—
Trade and other receivables		620			8,624			913			305			372
Cash and bank balances		181,575			3,829			45,203			—			15,086
Financial liabilities		(1,462	)		—			—			—			—
Trade and other payables		(6,184	)		(9,356	)		(10,858	)		(2,464	)		—

Net assets/(liabilities)		180,807			3,097			35,258			(2,159	)		15,458



	31.12.2021
	Singapore Dollar			Euro			US Dollar			Others
	RMB’000			RMB’000			RMB’000			RMB’000
Quoted equity securities		606			—			—			—
Trade and other receivables		676			8,806			297			—
Cash and bank balances		164,544			2,535			4,345			14,342
Financial liabilities		(1,428	)		—			—			—
Trade and other payables		(4,551	)		(8,997	)		(3,651	)		(510	)

Net assets/(liabilities)		159,847			2,344			991			13,832

US$’000		25,283			371			157			2,188

Foreign currency risk sensitivity

A 10% strengthening of the following major currencies against the functional currency of each of the Group’s entities at the reporting date would increase/(decrease) profit before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.


	Profit before tax
	31.12.2020			31.12.2021		31.12.2021
	RMB’000			RMB’000		US$’000
Singapore Dollar		18,081			15,985		2,528
Euro		310			234		37
US Dollar		3,526			99		16
Renminbi		(216	)		—		—

Equity price risk

The Group has investment in Thakral Corporation Ltd “TCL” which is quoted equity securities.

Equity price risk sensitivity

A 10% increase/(decrease) in the underlying prices at the reporting date would increase/(decrease) Group’s profit before tax by the following amount:


	31.12.2020		31.12.2021		31.12.2021
	RMB’000		RMB’000		US$’000
Statement of profit or loss		626		61		10

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit limits are established for all customers based on internal rating criteria.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed for all customers requiring credit over a certain amount.

An impairment analysis is performed at each reporting date using a provision matrix. The provision rates are determined based on days past due for groupings of various customer segments with similar loss patterns (i.e. by profiles of the customers). The calculation reflects the reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are

written-off

at management’s discretion after assessment and are not subject to enforcement activity. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 15. The Group’s share of bills receivables of a joint venture which was used as collateral as security is disclosed in Note 5.

Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix:


				Trade receivables
						Days past due
As of December 31, 2020	Total			Current		0 – 90 days			91-180 days			181-365 days			>365 days
	RMB’000			RMB’000		RMB’000			RMB’000			RMB’000			RMB’000
Expected credit loss rate		13.1	%		—		4.2	%		4.9	%		7.8	%		72.8	%
Estimated total gross carrying amount at default		332,567			126,706		91,233			29,675			36,413			48,540
Expected credit loss		43,519			—		3,860			1,451			2,852			35,356


				Trade receivables
						Days past due
As of December 31, 2021	Total			Current		0 – 90 days			91-180 days			181-365 days			>365 days
	RMB’000			RMB’000		RMB’000			RMB’000			RMB’000			RMB’000
Expected credit loss rate		6.0	%		—		0.6	%		5.9	%		13.2	%		56.6	%
Estimated total gross carrying amount at default		557,767			279,402		154,494			37,756			43,084			43,031
Expected credit loss		33,210			—		916			2,234			5,707			24,355

At December 31, 2021, the Group had top 20 customers (2020: top 20 customers) that owed the Group more than RMB 398.5 million (US$ 63.0 million) (2020: RMB 125.5 million) and accounted for approximately 63.4% (2020: 37.7%) of trade receivables (excluding bills receivables) respectively. These customers are located in the PRC. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets mentioned in Note 15. The Group’s share of bills receivables of a joint venture which was used as collateral as security is disclosed in Note 5.

Cash and fixed deposits are placed with banks and financial institutions which are regulated.

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows, and having adequate amounts of committed credit facilities.

The table below summarizes the maturity profile of the Group’s financial assets and liabilities based on contractual undiscounted payments.


	1 year or less		2 to 5 years		More than 5 years		Total
As of December 31, 2020	RMB’000		RMB’000		RMB’000		RMB’000
Financial assets
Trade and bills receivables		8,082,391		—		—		8,082,391
Other receivables, excluding tax recoverable		76,195		—		—		76,195
Cash and bank balances		6,307,538		140,000		—		6,447,538
Quoted equity securities		6,258		—		—		6,258

		14,472,382		140,000		—		14,612,382


Financial liabilities
Loans and borrowings		1,753,142		524,275		—		2,277,417
Trade and other payables (Note 22)		10,025,069		191,563		—		10,216,632
Lease liabilities		24,313		22,761		325		47,399

		11,802,524		738,599		325		12,541,448



	1 year or less		2 to 5 years		Total		Total
As of December 31, 2021	RMB’000		RMB’000		RMB’000		US$’000
Financial assets
Trade and bills receivables		6,961,657		—		6,961,657		1,101,145
Other receivables, excluding tax recoverable		140,835		—		140,835		22,277
Cash and bank balances		5,221,555		110,000		5,331,555		843,307
Quoted equity securities		606		—		606		96

		12,324,653		110,000		12,434,653		1,966,825


Financial liabilities
Loans and borrowings		2,130,356		101,524		2,231,880		353,023
Trade and other payables (Note 22)		9,586,901		188,725		9,775,626		1,546,238
Lease liabilities		28,121		13,650		41,771		6,607

		11,745,378		303,899		12,049,277		1,905,868