Sun Art Retail Group Limited - TodayIR.com

RISK FACTORS
any severe communicable disease occurs in the future and any of our employees or our customers in
our hypermarkets are suspected of having contracted any severe communicable disease or any of our
hypermarkets are identified as a possible source of spreading any severe communicable disease, we
may be required to quarantine the employees that have been suspected of becoming infected, as well
as others that had come into contact with those employees or customers. We may also be required to
disinfect our affected hypermarkets and therefore suffer a temporary suspension of our retail operations.
Any quarantine or suspension of our retail operations will affect our results of operations. Furthermore,
the outbreak of any severe communicable disease may result in food safety concerns, which could have
an adverse impact on our turnover. Such an outbreak would likely restrict the level of economic activity
in affected areas, which would also materially and adversely affect our business operations.
Consumer spending patterns in China can be influenced by the state of China’s economy.
Consumer spending patterns in China are influenced by the state of China’s economy, which in turn
affects our sales volume, turnover, profitability and our growth. We believe that Chinese consumers tend
to increase their expenditure when the Chinese economy is experiencing strong growth and when they
have more disposable income available for personal consumption. Conversely, a recession in the Chinese
economy, or uncertainties regarding future economic prospects may result in a reduction in consumer
spending at our hypermarkets. As a result, the state of the economy in China has had a significant impact
on our historical, and will continue to have a significant impact on our future, performance, results of
operations and profitability. Although in recent years, the PRC economy has maintained rapid growth, and
increases in GDP and per capita disposable income have strengthened consumers’ purchasing power, we
cannot assure you that such growth will not slow down or will continue in the future. In addition, the impact
on the PRC economy of inflation and the unequal impact of inflation on different categories of products,
such as food products, may affect consumer spending patterns and materially and adversely affect our
business, financial condition and results of operations. A slowdown or downturn in the economies of the
United States, the countries comprising the European Union and certain Asian nations, with which China
has important trade relationships, could materially and adversely affect the economic growth of China.
Any economic downturn in the PRC and its effect on consumer spending patterns may materially and
adversely affect our business, financial condition and results of operations and our future prospects.
Future fluctuations in foreign exchange rates and government control in currency conversion may
materially and adversely affect the ability of the Company to remit dividends.
A substantial proportion of our turnover and expenditure are denominated in Renminbi, which is currently
not a freely convertible currency. We will require foreign currencies for dividend payment (if any) to our
Shareholders. In addition, the price at which we purchase merchandise and products from our suppliers
may be affected to the extent our suppliers’ merchandise and products are imported or otherwise subject
to foreign currency fluctuations. We will therefore be exposed to foreign currency fluctuations. Should
there be significant changes in the exchange rates of US dollars or Hong Kong dollars against Renminbi,
our Company’s ability to make dividend payments in foreign currencies may be materially and adversely
affected. In addition, any significant change in the exchange rates of the Renminbi against the US dollar
or the Hong Kong dollar could materially and adversely affect the value of our Company’s dividends,
which would be funded by Renminbi but paid in Hong Kong dollars.
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Sun Art Retail Group Limited
Annual Report 2012